Filed 3/3/20

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

SIRY INVESTMENT, L.P.,

Plaintiff and Appellant,

v.

SAEED FARKHONDEHPOUR et al.,

Defendants and Appellants.

 B277750 

(Consolidated with B279009 

and B285904)

 (Los Angeles County

 Super. Ct. No. BC372362)

APPEAL from a judgment of the Superior Court of Los 

Angeles County. Stephanie M. Bowick, Judge; and Edward B. 

Moreton, Judge. Affirmed as modified. 

Wilson, Elser, Moskowitz, Edelman & Dicker, Gregory D. 

Hagen, and Robert Cooper for Plaintiff and Appellant.

Richard L. Knickerbocker for Defendants and Appellants 

Saeed Farkhondehpour, individually and as trustee of the 1994 

Farkhondehpour Family Trust, and 416 South Wall Street, Inc.

Fisher & Wolfe and David Fisher for Defendant and 

Appellant Morad Neman, individually and as former trustee of 
2

the Neman Family Irrevocable Trust and the Yedidia 

Investments Defined Benefit Plan.

Greines Martin Stein & Richland, Robert A. Olson, and 

Edward L. Xanders for Defendant and Appellant Morad Neman, 

individually and as former trustee of the Neman Family 

Irrevocable Trust and the Yedidia Investments Defined Benefit 

Plan.

* * * * * *

This is the fourth appeal in this longstanding lawsuit, and 

challenges a $7 million default judgment entered after the trial 

court issued terminating sanctions. Among the many issues 

raised by the parties on appeal, three present significant legal 

questions: (1) May a trial court issue terminating sanctions when 

the discovery a party contumaciously refuses to provide 

encompasses fewer than all the issues in a case; (2) May a party 

in default file a motion for new trial raising “[e]rror[s] in law,” 

including the inapplicability of certain remedies under the 

allegations as pled; and (3) May a trial court award treble 

damages and attorney fees under Penal Code section 496, 

subdivision (c), in a case involving the fraudulent diversion of 

business funds rather than trafficking in stolen goods? 

On the first question, we conclude that a trial court is not 

foreclosed from issuing terminating sanctions just because the 

underlying discovery encompasses only a subset of the issues in 

the case. On the second question, we conclude that a party 

against whom a default has been entered may file a motion for 

new trial attacking the default judgment as containing “error[s] 

in law.” And on the third question, we conclude that Penal Code

section 496, subdivision (c) only authorizes an award of treble 

damages or attorney fees when the underlying conduct involves 
3

trafficking in stolen goods; in so doing, we respectfully part ways 

with Switzer v. Wood (2019) 35 Cal.App.5th 116 (Switzer), which 

holds to the contrary.

After considering all of the parties’ arguments in these 

consolidated cross-appeals, we affirm the entry of terminating 

sanctions but modify the judgment to eliminate the awards of 

treble damages and attorney fees. 

FACTS AND PROCEDURAL HISTORY

I. Facts1

In 1998, Moe Siry, Saeed Farkhondehpour

(Farkhondehpour), and Morad Neman (Neman) formed a limited 

partnership to renovate and lease space in a mixed-use building 

in downtown Los Angeles. The partnership agreement named 

one general partner (namely, 416 South Wall Street, Inc. (416 

South Wall Street), of which Farkhondehpour was president) and 

four limited partners (namely, Siry Investment, L.P. (Siry), the 

1993 Farkhondehpour Family Trust (of which Farkhondehpour

was trustee), the Neman Family Irrevocable Trust (of which 

Neman was trustee), and the Yedidia Investment Defined Benefit 

Plan Trust (of which Neman was also trustee)). The agreement 

divvied up the partnership’s cash distributions as follows: Siry 

was to receive 39.60 percent; the Farkhondehpour Family Trust, 

29.70 percent; the Neman Family Irrevocable Trust, 19.80 

percent; and the Yedidia plan, 9.90 percent. A separate entity—

 

1 As is appropriate on review of a default judgment, we draw 

these facts from the allegations of the operative fifth amended 

complaint, as well as documents subject to judicial notice. (Los 

Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 392-393

(Los Defensores); Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 

(Evans).) 
4

namely, Investment Consultants, LLC (Investment 

Consultants)—was responsible for acting as property manager, 

for making the required cash distributions, and for managing the 

renovations. 

In 2003, Farkhondehpour, Neman, and 416 South Wall 

Street created an entity named DTLA, required the building’s 

tenants to pay their rent to DTLA, and through these means 

started to “improperly divert rental income away from the 

. . . [limited] partnership and into DTLA.” Farkhondehpour and 

Neman also began to charge personal and other non-partnership 

expenses to the partnership. The net effect of these actions was 

to direct Investment Consultants to underpay Siry its cash 

distributions. What is more, Farkhondehpour and Neman 

ensured that Siry remained unaware of the underpayments by 

misrepresenting to Siry the building’s rental income and the 

partnership’s expenses, effectively lying to Siry about what its 

cash distributions should have been. 

II. Procedural Background

A. Siry’s lawsuit, first trial and reversal

In June 2007, Siry sued Neman, Farkhondehpour, 416 

South Wall Street, and the trusts over which they were trustees 

(collectively, defendants) for underpaying Siry and improperly 

diverting the partnership’s rental income to their own coffers.2

 

2 Siry also sued the limited partnership, but it was not 

dismissed as part of the terminating sanctions. The partnership 

had since been dissolved, and Siry’s prosecution of the action 

presumed that the partnership was effectively dismissed. We 

presume the same.

This was the second lawsuit arising out of the partnership. 

In 2003, Farkhondehpour and Neman sued Siry for breach of a 
5

The matter proceeded to a jury trial in October 2009. At 

that time, Siry’s operative second amended complaint sought (1) 

dissolution and winding up of the limited partnership, (2) an 

accounting, (3) damages for breach of the agreement, and (4) 

damages for breach of fiduciary duty. The jury found for Siry, 

awarding actual damages of $242,975 and punitive damages of 

$1.1 million against Farkhondehpour and $2 million against 

Neman. The trial court denied a subsequent motion for a new 

trial, but reduced the punitive damages awards to $728,925 

against each Farkhondehpour and Neman. 

In December 2012, we reversed the jury’s verdict. (Siry 

Inv., L.P. v. Farkhondehpour (Dec. 12, 2012, B223100, B234655) 

2012 Cal.App.Unpub.LEXIS 9014 [nonpub opn.].) We did so 

because the special verdict form submitted to the jury did not 

require the jury to specify whether Farkhondehpour and Neman 

were liable to Siry individually or as trustees of the various 

trusts. This defect rendered the verdict “hopelessly ambiguous” 

and, because “who is liable [was] key,” necessitated a remand for 

a re-trial. (Id., at *2, *4, *6-*7, *11.)

B. Issuance of terminating sanctions on remand

On remand, Siry propounded two rounds of discovery on 

defendants—a first round in October 2013 and a second in 

January 2014. As discussed in more detail below, defendants did 

not compliantly respond to the discovery or to the trial court’s 

subsequent orders to respond to that discovery without objection. 

 

different agreement, and Siry cross-claimed for underpayment of 

cash distributions from the partnership. After an arbitrator 

rejected Farkhondehpour’s and Neman’s claims, Siry settled its 

remaining cross-claims in 2007, with the requirement that 

Farkhondehpour and Neman provide an accounting (and, if 

warranted, a redistribution) of the partnership’s profits.
6

In late June 2015, Siry moved for terminating sanctions 

due to defendants’ steadfast refusal to respond to Siry’s discovery 

requests or to obey the court’s multiple orders compelling 

responses. At that time, Siry’s operative fifth amended complaint 

sought (1) compensatory damages for breach of the partnership 

agreement, breach of an oral contract, breach of fiduciary duty, 

aiding and abetting breach of fiduciary duty, and fraud;3(2) 

punitive damages; (3) treble damages pursuant to Penal Code 

section 496, subdivision (c); and (4) attorney fees under Penal 

Code section 496 as well as Code of Civil Procedure section 

1029.84(on the ground that defendants were acting as unlicensed 

contractors and unlicensed broker-dealers). Siry had not sought 

treble damages or attorney fees prior to the first trial. Mere 

weeks before filing its motion for terminating sanctions, Siry 

served defendants with notices that it was seeking $4 million in 

punitive damages against each of them. 

Defendants opposed the motion with a brief and nearly 

1,700 pages of exhibits. The court held two hearings and issued a 

written order striking defendants’ answers and entering their

default. 

C. Default prove-up and entry of judgment

Siry filed over 2,000 pages of documents in anticipation of

the hearing at which it would prove up its damages. 

After reviewing the documentation, the court in July 2016 

issued an order finding that Siry had “met its evidentiary burden 

 

3 Siry later dismissed its breach of contract and aiding and 

abetting claims. 

4 All further statutory references are to the Code of Civil 

Procedure unless otherwise indicated.
7

as to all claims.” The court went on to enter default judgment 

against defendants awarding Siry (1) actual compensatory 

damages of $956,487, comprised of $534,118 in actual damages 

plus $422,369 in pre-judgment interest; (2) treble damages of 

$2,869,461 pursuant to Penal Code section 496, subdivision (c); 

(3) punitive damages of $4 million (plus $1 against only 416 

South Wall Street); (4) attorney fees totaling $4,010,008.97; and 

(5) costs of $187,109.13. The total came to $12,023,067.10. 

D. Reduction of damages upon a new trial motion

In August 2016, defendants filed a motion for new trial on 

several grounds. Among other things (and as pertinent to this 

appeal), defendants argued that the trial court had awarded 

excessive damages and committed errors in law by (1) awarding 

treble damages under Penal Code section 496, subdivision (c); (2) 

miscalculating the treble damages award; (3) awarding a 

constitutionally excessive amount of punitive damages; (4) 

allowing Siry to collect both treble damages and punitive 

damages, rather than requiring Siry to elect between them; and 

(5) awarding Siry attorney fees under Penal Code section 496, 

subdivision (c) and section 1029.8. 

After Siry opposed the motion, the trial court in September 

2016 partially denied and partially granted the motion. As a 

threshold matter, the court ruled that defendants had standing to 

make a new trial motion notwithstanding the entry of default. 

On the merits, the court ruled that (1) treble damages were 

properly awarded under Penal Code section 496, subdivision (c), 

but (2) it had miscalculated the treble damages award (and 

reduced them to $1,912,974); (3) its award of $4 million in 

punitive damages was constitutionally excessive (and reduced the 

damages to $1 million each against Farkhondehpour and 
8

Neman); (4) Siry would have to elect between treble damages and 

punitive damages; and (5) attorney fees were properly awarded 

under Penal Code section 496, subdivision (c) and section 1029.8.

In early October 2016, Siry filed a notice electing to collect 

treble damages (rather than punitive damages). 

In late October 2016, the court entered an amended 

judgment against defendants, jointly and severally, awarding

Siry (1) actual compensatory damages of $956,487, comprised of 

$534,118 in actual damages plus $422,369 in pre-judgment 

interest; (2) treble damages of $1,912,974 pursuant to Penal Code 

section 496, subdivision (c); (3) attorney fees totaling 

$4,010,008.97; and (4) costs of $187,109.13. The total came to 

$7,066,579.10. 

E. Appeals

Defendants filed a timely appeal from the original default 

judgment, and from the amended judgment. Siry filed a timely 

cross-appeal from the amended judgment.5

 

5 Siry and Neman also filed timely appeals from the trial 

court’s October 2017 order reducing the amended judgment by 

the amount of costs defendants were awarded for prevailing in 

the appeal of the jury’s verdict. However, none of the parties 

contests the merits of the offset in this consolidated appeal.

As Siry conceded at oral argument, it argued for the first 

time in its cross-reply brief that the offset order to the amended 

judgment effectively constitutes a second amended judgment and 

that the failure of Farkhondehpour, the Farkhondehpour Trust,

and 416 South Wall Street to file notices of appeal from the offset 

order precludes them from raising any challenges in these 

consolidated cross-appeals. Apart from being waived (Garcia v. 

McCutchen (1997) 16 Cal.4th 469, 482, fn. 10 (Garcia) 

[arguments raised for the first time in a reply brief are waived]), 

this argument lacks merit: A further notice of appeal is required 
9

DISCUSSION

The issues raised in this appeal and cross-appeal fall into 

two broad categories—namely, (1) defendants’ challenge to the 

entry of terminating sanctions, and (2) the parties’ various 

challenges to the amount of the default judgment. We will 

address each separately.

I. Terminating Sanctions

Defendants argue that the trial court erred in issuing 

terminating sanctions.

A. Pertinent facts

1. Siry’s discovery requests and the trial court’s

orders compelling responses to those requests

Following remand from this court’s ruling overturning the 

2009 jury verdict, Siry propounded two rounds of discovery 

relevant to this appeal.

a. October 2013 requests for document 

production regarding liability

In mid-October 2013, Siry issued each of the defendants 

requests to produce documents relating to, among other things, 

(1) their “interest in” the partnership, the property, 416 South 

Wall Street, DTLA, and Investment Consultants; (2) the 

“compensation [each defendant] received from” the partnership, 

416 South Wall Street, DTLA, and Investment Consultants; (3) 

the partnership agreements, operating agreements, and 

 

only when an amendment to a judgment “results in a substantial 

modification of [the] judgment” (Dakota Payphone, LLC v. 

Alcaraz (2011) 192 Cal.App.4th 493, 504 (Dakota)); an 

“amend[ment] to add costs” is not a “substantial modification” 

(id., at pp. 504-505; Sanchez v. Strickland (2011) 200 Cal.App.4th 

758, 765); and the offset order merely offset costs. Neither logic 

nor policy warrants treating an amendment subtracting costs 

differently from one adding them.
10

dissolution documents for the partnership and 416 South Wall 

Street; (4) the partnership’s operating expenses, profits, losses, 

income, assets, expenditures and distributions; and (5) any 

payments and transfers of assets to/from Investment 

Consultants, DTLA, and 416 South Wall Street. Siry requested 

documents created between January 1, 2002 and December 31, 

2010. 

Defendants did not respond to these requests by the 

production deadline.

The trial court issued four separate orders compelling 

defendants to respond to these requests and to do so without any 

objections. First, on Valentine’s Day 2014, the court granted 

Siry’s motion to compel and ordered defendants to produce 

responsive documents by St. Patrick’s Day 2014. Second, on 

April 4, 2014, the trial court confirmed that its first order 

required the production to be without objections and set a new 

deadline of April 23, 2014. Third, on July 15, 2014, the court 

once again ordered defendants to produce documents without 

objections. And, fourth, on October 9, 2014, the court refused to 

reconsider its third order and adopted a discovery referee’s 

recommendation that defendants produce responsive documents 

without objection. The court also imposed monetary sanctions of 

$10,000 against Farkhondehpour and his counsel (who, at that 

time, was representing all of the defendants) for their

intransigence in not complying with the court’s prior orders.6

 

6 We affirmed that order in Siry Inv., L.P. v. 

Farkhondehpour (Sept. 5, 2017, amended Sept. 13, 2017, 

B260560) 2017 Cal.App.Unpub.LEXIS 6325 [nonpub. opn.].
11

b. January 2014 requests for document 

production and special interrogatories regarding financial 

condition

In mid-January 2014, Siry issued each of the defendants (1) 

a second set of requests for document production, and (2) special 

interrogatories. The document requests sought, among other 

things, “[a]ll documents that relate, refer or pertain to” each 

defendant’s financial accounts, tangible personal property,

intangible personal property, retirement accounts, assets,

transfer of assets, liabilities, compensation received and owed,

tax records, real property interests, financial records, interest 

and dividends, and monies owed. The special interrogatories 

paralleled the document requests, seeking answers regarding 

each of the above listed categories of documents. Siry requested

information from January 1, 2010 to mid-January 2014. Prior to 

propounding this discovery on defendants’ financial condition, 

Siry sought and obtained an order authorizing such discovery

pursuant to Civil Code section 3295, subdivision (c), and making

all responses due on February 15, 2014. At the hearing on 

Valentine’s Day 2014, Siry voluntarily narrowed the scope of its 

document requests and special interrogatories to only those 

“financial [documents] presented to third parties.” 

Defendants did not respond to the narrowed requests by 

the due date.

The trial court issued two separate orders compelling 

defendants to respond to these requests and to do so without any 

objections. First, on April 4, 2014, the court ordered defendants 

to “produce responsive documents” and answer the 

interrogatories without objections by April 23, 2014. Second, on 

October 9, 2014, the court adopted the discovery referee’s 
12

recommendation that defendants respond to this discovery 

without objection. 

2. Defendants’ non-compliance with the trial 

court’s orders

Notwithstanding the trial court’s express warning that 

continued non-compliance “may result in . . . terminating 

sanctions,” defendants never complied with any of the court’s 

orders because, to this day, defendants have never produced

responsive documents or answered the interrogatories without 

objections. Instead, defendants responded to the court’s orders 

(1) by serving multiple “responses” that consisted entirely of 

objections or non-compliant answers (such as “not applicable”)

without the disclosure of any documents or information, some of 

which reached nearly 400 pages in length; (2) by repeatedly 

challenging the court’s orders through motions for clarification, 

reconsideration, relief from waiver, and a stay of discovery; or, as 

to Farkhondehpour, (3) by making a last-minute offer to come 

down to Farkhondehpour’s or Investment Consultants’s office to 

search for documents. Worse yet, defendants’ counsel below7

engaged in tactics that can only be characterized as 

underhanded: He on July 3, 2014, filed an ex parte motion for 

clarification of whether the court’s earlier April 4, 2014 order 

required disclosure without objections, but the motion only cited 

the portion of the court’s April 4 minute order setting forth its 

tentative ruling (which said objections could be made) rather than 

its actual, final ruling (which said they could not); Siry was not 

present at the hearing on the ex parte motion (and thus unable to 

point out this misrepresentation) because counsel had not 

 

7 Neman has been represented by new counsel since the 

terminating sanctions were entered. 
13

properly given Siry notice of the ex parte filing; and, after the 

court granted relief based on the representations in the ex parte 

filing and Siry subsequently moved the court to reconsider that 

relief in light of the falsity of those representations, counsel 

opposed Siry’s motion.

3. Entry of terminating sanctions

In its July 2015 oral ruling and August 2015 written order, 

the trial court granted Siry’s June 2015 motion for terminating 

sanctions against defendants. Defendants’ “18 months of lack of 

compliance” with the [discovery] requests and the multiple court 

orders compelling responses to those requests, the court found, 

constituted a “history” of “willful,” “flagrant,” “persistent[]” and 

“deliberate” discovery “abuse.” In the court’s view, defendants’ 

practice of responding to Siry’s requests and the court’s orders 

with “document dump[s]” and Farkhondehpour’s last-minute 

offer to look in his and Investment Consultants’s warehouse for 

responsive documents constituted “gamesmanship,” not 

compliance. What is more, defendants’ “stall tactics” as to 

discovery of “significance” to the merits of Siry’s claims and of 

defendants’ financial wherewithal (as relevant to punitive 

damages) “severely prejudiced” Siry “in [its] ability to properly 

prepare for trial” within the statutory deadline for retrial 

following remand. In light of this history of non-compliance, the 

looming deadline for retrial, and ineffectiveness of the prior 

monetary sanction and threat of terminating sanctions, the court 

found that “a less severe sanction will clearly not now yield 

compliance” because defendants’ “stall tactics would continue 

even if the court were to come up with some type of lesser 

sanction.” 

B. Analysis
14

The Civil Discovery Act (section 2016.010 et seq.) imbues 

trial courts with “broad” discretion to sanction the “misuse of the 

discovery process.” (Lopez v. Watchtower Bible & Tract Society of 

New York (2016) 246 Cal.App.4th 566, 604 (Lopez); § 2023.030.) 

As pertinent here, “misuse of the discovery process” includes (1) 

“[f]ailing to respond [to] or to submit to an authorized method of 

discovery, (2) “[m]aking an evasive response to discovery,” and (3) 

“[d]isobeying a court order to provide discovery.” (§ 2023.010, 

subds. (d), (f) & (g).) When confronted with such misuse, a court 

may impose (1) monetary sanctions (§ 2023.030, subd. (a)), (2) 

sanctions that deem specified issues to be “established” or that 

“prohibit” the non-compliant party from raising “opposing 

. . . claims or defenses” (so-called “issue sanctions”) (id., subd. (b)), 

(3) sanctions that preclude the admission of evidence (so-called 

“eviden[tiary] sanction[s]”) (id., subd. (c)), or (4) “terminating 

sanction[s],” which include “striking [a defendant’s] answer” (id., 

subd. (d)). We review an order granting terminating sanctions 

for an abuse of discretion. (Lopez, at p. 604.) Critically, our task 

is to assess “whether the trial court abused its discretion in 

ordering dismissal as a sanction” (Laguna Auto Body v. Farmers 

Ins. Exchange (1991) 231 Cal.App.3d 481, 491), rather than 

assess “‘whether the trial court should have imposed a lesser 

sanction’” (Liberty Mutual Fire Ins. Co. v. LcL Administrators, 

Inc. (2008) 163 Cal.App.4th 1093, 1105). We review any 

subsidiary factual findings for substantial evidence. (Department 

of Forestry & Fire Protection v. Howell (2017) 18 Cal.App.5th 154, 

192 (Howell).)

When faced with a party’s misuse of the discovery process, 

a trial court “should” impose “[t]he penalty . . . appropriate to the 

dereliction.” (Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 793 
15

(Deyo); Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1293

(Reedy).) That is because the purpose of discovery sanctions is to 

“protect the interests of the party entitled to[,] but denied[,] 

discovery,” not to “punish[]” the non-compliant party or to “put 

the prevailing party in a better position than he would have had 

if he had obtained the discovery sought.” (Deyo, at p. 793; 

Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 

1163 (Sherman); Doppes v. Bentley Motors, Inc. (2009) 174 

Cal.App.4th 967, 992.) Proportionality is critical when it comes 

to terminating sanctions because they altogether deny the noncompliant party a hearing on the merits and thus implicate due 

process. (Lopez, supra, 246 Cal.App.4th at p. 604.) 

To ensure proportionality, trial courts should generally 

take an “incremental” approach—that is, they should “attempt[]

less severe alternative[ sanctions]” unless the “record clearly 

shows lesser sanctions would be ineffective.” (Lopez, supra, 246 

Cal.App.4th at p. 604; Howell, supra, 18 Cal.App.5th at pp. 191-

192.) In calibrating the sanction that is appropriate for the 

dereliction, trial courts must make a “meaningful effort to 

determine whether . . . alternative[, lesser sanctions] would be 

effective” at inducing the non-compliant party to produce the 

discovery, thereby “protect[ing] the interests of the party entitled 

to . . . discovery.” (Lopez, at p. 606; Deyo, supra, 84 Cal.App.3d at 

p. 793.) In undertaking this effort, trial courts should examine 

the “totality of the circumstances,” including: (1) whether the 

party’s non-compliance is the latest chapter in a longer “history of 

abuse,” which looks to “the number of formal and informal 

attempts to obtain the discovery” as well as whether prior court 

orders compelling discovery have gone unheeded (Mileikowsky v. 

Tenet Healthsystem (2005) 128 Cal.App.4th 262, 279-280
16

(Mileikowsky); Lang v. Hochman (2000) 77 Cal.App.4th 1225, 

1246 (Lang)); (2) whether the party’s non-compliance was 

“willful” (McGinty v. Superior Court (1994) 26 Cal.App.4th 204, 

212; Parker v. Wolters Kluwer United States, Inc. (2007) 149 

Cal.App.4th 285, 297 (Parker)); (3) whether the non-compliance 

persisted despite warnings from the court that greater sanctions 

might follow (Electronic Funds Solutions, LLC v. Murphy (2005) 

134 Cal.App.4th 1161, 1184 (Electronic Funds)); (4) whether the 

non-compliance encompasses all or only some of the issues in the 

case (Reedy, supra, 148 Cal.App.4th at p. 1293); and (5) the 

extent of the “detriment to the propounding party” that flows 

from the inability to obtain the discovery at issue (Lang, at p. 

1246).

Because terminating sanctions are the most “drastic” 

penalty, they are typically a “last resort” to be “used sparingly.” 

(Howell, supra, 18 Cal.App.5th at p. 191; Lopez, supra, 246 

Cal.App.4th at p. 604; Deyo, supra, 84 Cal.App.3d at p. 793.) 

However, they may still be appropriate “as a first measure” in 

“extreme cases” where a litigant violates a court order and

“persists in the outright refusal to comply with [its] discovery 

obligations.” (Deyo, at pp. 793, 795; Howell, at pp. 191-192; Fred 

Howland Co. v. Superior Court of Los Angeles (1966) 244 

Cal.App.2d 605, 612 (Fred Howland).) Put differently, the 

imposition of lesser sanctions is “not an absolute prerequisite” to 

the imposition of terminating sanctions for violation of a court 

order. (Alliance Bank v. Murray (1984) 161 Cal.App.3d 1, 10; 

Deyo, at p. 787.) 

The trial court in this case did not abuse its discretion in 

coming to the conclusion, after examining the totality of the 

circumstances, that terminating sanctions were the appropriate 
17

sanction for defendants’ non-compliance. Defendants have a 

fulsome history of discovery abuse: They ignored Siry’s two 

rounds of post-remand discovery and then flouted multiple court 

orders to provide documents and responses without objection, 

preferring instead to make multiple motions for clarification and 

reconsideration, to bury Siry and the court with “document 

dump[s],” and then to try to avoid the consequences of their 

discovery misconduct by making feckless, last-minute offers to 

rummage through their files for responsive documents. 

Defendants’ conduct was both willful and, worse yet, 

calculated: They frankly admitted, when opposing Siry’s motion 

for leave to file a fifth amended complaint, that they had been 

“evaluat[ing] the risk” that their willful non-compliance might 

ripen into terminating sanctions vis-à-vis their maximum 

exposure under the prior complaint(s). “[A] litigant’s conscious 

decision to deliberately” “evade the discovery process” “based on 

the perception [that] damages are limited to a particular amount” 

is inimical to the orderly litigation of disputes. (Behm v. Clear 

View Technologies (2015) 241 Cal.App.4th 1, 10; Electronic 

Funds, supra, 134 Cal.App.4th at p. 1178.) For this reason, 

Farkhondehpour’s argument that the terminating sanctions are 

invalid because Siry’s otherwise timely notice fixing the amount 

of punitive damages was not filed until just before Siry sought 

terminating sanctions necessarily fails. Further, defendants 

persisted in their non-compliance despite express warning from 

the trial court that terminating sanctions were on the horizon. 

As discussed more fully below, the discovery that defendants 

steadfastly refused to provide covered a broad swath of issues 

central to defendants’ liability and the measure of damages. And 

Siry’s inability to obtain this discovery for the 18-plus months 
18

between its propounding and the court’s terminating sanctions 

order not only deprived Siry of that information, but also left Siry 

with almost no time on the clock before the three-year period for 

retrial following remand expired (§ 583.310, subd. (a)(3)).

As this analysis indicates, defendants “persist[ed] in [an] 

outright refusal to comply with [their] discovery obligations,” 

making this one of the “extreme cases” where terminating

sanctions were appropriate in the first instance for violation of a 

court order because issue and evidentiary sanctions would have 

been ineffectual. (Deyo, supra, 84 Cal.App.3d at pp. 793, 795; 

Howell, supra, 18 Cal.App.5th at pp. 191-192; Fred Howland,

supra, 244 Cal.App.2d at p. 612; see also Collisson & Kaplan v. 

Hartunian (1994) 21 Cal.App.4th 1611, 1617-1622 [imposing 

terminating sanctions as a first penalty].) Defendants’ assertion 

on appeal that the trial court made only a “conclusory,” 

“nominal[],” “casual,” un-“genuine[],” and “[in]sincere” effort to 

evaluate lesser sanctions flatly mischaracterizes the record, 

which shows that the court considered all of the circumstances

set forth above. Defendants’ further observation that the only 

defendant previously subject to monetary sanctions was 

Farkhondehpour overlooks that all defendants had engaged in 

the same underlying discovery misconduct and that misconduct 

had all been orchestrated by the same attorney; the court thus 

had ample reason to find that the ineffectiveness of the monetary 

sanction against Farkhondehpour (and defendants’ counsel)

applied with equal force to all defendants. And 

Farkhondehpour’s contention that Siry’s motion for terminating 

sanctions was defective because it, and the underlying discovery 

orders he violated, were unaccompanied by a separate statement 

or any due date for responses lacks merit because it ignores that 
19

a separate statement is not required for a motion for terminating 

sanctions (Cal. Rules of Court, rule 3.1345(a)) or for a motion to 

compel when there has been no response (id., rule 3.1345(b)), that 

the trial court’s initial orders to compel set forth due dates, and 

that its later orders without due dates merely denied defendants’ 

seemingly endless stream of motions for reconsideration and 

confirmed the earlier orders that defendants had already 

violated.

C. Defendants’ arguments

1. Are terminating sanctions available when the 

underlying discovery requests do not encompass all issues in the 

case?

Defendants argue that a trial court may issue terminating 

sanctions against a defendant only if the discovery that a

defendant refuses to provide encompasses all of the issues to be 

tried. When a defendant’s non-compliance involves anything less 

than all the issues, they reason, sanctions that terminate the 

entire proceeding put the propounding party “in a better position 

than [it] would have [been] . . . had [it] obtained [that] discovery.” 

(Deyo, supra, 84 Cal.App.3d at p. 793; Sherman, supra, 67 

Cal.App.4th at p. 1163.) Thus, they conclude, the trial court in 

this case abused its discretion in issuing terminating sanctions 

because the discovery Siry sought reached only the discrete 

issues of “alter ego” and defendants’ “financial condition,” and not 

every issue in Siry’s affirmative case or defendants’ proffered 

affirmative defenses of res judicata and the statute of limitations.

Farkhondehpour elaborates on this argument in his reply brief on 

appeal by asserting that Siry has failed to prove its case was 

prejudiced by defendants’ non-compliance. This argument lacks 

merit legally and factually.

Defendants’ argument is legally flawed for three reasons. 
20

First and foremost, it is inconsistent with the law 

governing discovery sanctions. That law grants trial courts 

“broad” discretion to consider “the totality of the circumstances” 

in making the sanction fit the violation. (Parker, supra, 149 

Cal.App.4th at p. 297; Lang, supra, 77 Cal.App.4th at p. 1246.) 

Defendants’ proffered rule would trade this flexibility for 

ossification by converting one factor—namely, the breadth of 

issues involved in the discovery—from a relevant circumstance 

into a dispositive one. (Reedy, supra, 148 Cal.App.4th at p. 1293.) 

It would also require courts to endure “defiant disobedience” of 

their orders compelling discovery if those orders pertained to

discovery addressing fewer than all the issues in a case, even 

though trial courts are “not required to allow . . . abuse to 

continue ad infinitum.” (Mileikowsky, supra, 128 Cal.App.4th at 

p. 280; Miranda v. 21st Century Ins. Co. (2004) 117 Cal.App.4th 

913, 929 (Miranda).) Not surprisingly, courts have rejected 

defendants’ rule. (E.g., Miranda, at pp. 928-929 [affirming 

terminating sanctions against a plaintiff for non-compliance with 

order compelling discovery pertaining to causation alone].) 

To be sure, some cases contain language that arguably 

supports the issue-based limitation on discovery sanctions urged 

by defendants. In Caryl Richards, Inc. v. Superior Court (1961) 

188 Cal.App.2d 300 (Caryl Richards), the court stated that a trial 

court “abuses its discretion” “when its [sanctions] order . . . denies 

a party any right to defend the action or to present evidence upon 

issues of fact which are entirely unaffected by the discovery 

procedure before it.” (Id. at p. 305.) But the non-complying party 

in Caryl Richards had complied with every discovery request and 

order except an order to disclose the chemical formula of its

hairspray, which it asserted was a trade secret (id. at pp. 301-
21

305); on those facts, Caryl Richards held, a terminating sanction 

went too far. Caryl Richards did not speak to parties, like 

defendants here, who have steadfastly refused to comply with 

multiple discovery requests or orders. Nor do any of the other 

cases cited by defendants. (E.g., McArthur v. Bockman (1989) 

208 Cal.App.3d 1076, 1080-1081 [party’s non-compliance limited 

to information regarding its wealth; terminating sanctions held 

excessive]; Wilson v. Jefferson (1985) 163 Cal.App.3d 952, 958-

959 [party’s non-compliance limited to discovery regarding 

affirmative defense; terminating sanctions held excessive]; Lopez,

supra, 246 Cal.App.4th at p. 606 [party’s non-compliance limited 

to information regarding other victims of sexual abuse not 

involved in the case; terminating sanctions held excessive]; 

Thomas v. Luong (1986) 187 Cal.App.3d 76, 81-82 [party’s noncompliance limited to failure to appear for deposition, but party 

offered to stipulate to liability; terminating sanctions held 

excessive].)

Second, a rule prohibiting trial courts from issuing 

terminating sanctions unless the discovery in question

encompasses every issue in a case would incentivize litigants to 

engage in behavior that is inimical to the Civil Discovery Act’s 

purposes of “‘enhanc[ing] the truth-seeking function’” of litigation 

and “‘eliminat[ing] trial strategies that focus on gamesmanship 

and surprise.’ [Citation.]” (Jaurez v. Boy Scouts of America, Inc.

(2000) 81 Cal.App.4th 377, 389.) On the one hand, litigants 

served with discovery requests encompassing fewer than every 

issue would be immune from terminating sanctions, and thus 

freer to ignore those requests—or orders compelling compliance 

with them—because the maximum sanction would be an issue or 

evidentiary sanction. But selective lawlessness is still 
22

lawlessness, and is something our system of justice does not 

tolerate. (Electronic Funds, supra, 134 Cal.App.4th at p. 1178 

[“[I]f a [litigant] chooses to participate [in litigation], he or she 

must play by the rules.”].) This is just as true for a rule that 

would enable—and hence encourage—such lawlessness by 

defendants alone, for whom terminating sanctions mean an 

adverse damages award. And where, as here, discovery is 

propounded on remand, terminating sanctions are likely never to 

be available because any post-remand discovery, to avoid being 

duplicative of the discovery propounded prior to trial and appeal, 

is likely to be more limited in scope (in terms of time or subject

matter). This impermissibly rewrites the Civil Discovery Act by 

deleting terminating sanctions as an option after a remand. (See 

Fairmont Ins. Co. v. Superior Court (2000) 22 Cal.4th 245, 250-

251 [noting that Civil Discovery Act applies post-remand].) On 

the other hand, under defendants’ proposed rule, litigants 

seeking to keep terminating sanctions as an available remedy 

would have every incentive to propound overly broad discovery 

requests, a result also at odds with the efficient exchange of 

information. We decline to construe the Civil Discovery Act in a 

way that creates such perverse incentives. (E.g., Pacific Sunwear 

of California, Inc. v. Olaes Enterprises, Inc. (2008) 167 

Cal.App.4th 466, 480.)

Third, a party seeking terminating sanctions for another 

party’s discovery misconduct need not prove prejudice where, as 

here, the misconduct relates to discovery the moving party 

propounded. (Electronic Funds, supra, 134 Cal.App.4th at p.

1184 [rejecting argument that, absent a showing of prejudice, 

terminating sanctions constitute a “windfall”]; cf. Parker, supra,

149 Cal.App.4th at p. 301 [“nonpropounding party” may obtain 
23

terminating sanctions “only if . . . [it] shows it suffered a 

detriment as the result of the sanctioned party’s misuse of the 

discovery process”].) This rule makes sense. A prejudice 

requirement would be “difficult,” if not “impossible,” for a 

propounding party to meet because a showing of prejudice would 

likely turn on the significance of the information that the noncompliant party is refusing to disclose. (Electronic Funds, at p. 

1184.) A prejudice requirement would also empower intransigent

parties to continue their intransigence on the ground that the 

documents they were withholding are not that important. As we

noted above, such selective lawlessness is still lawlessness. 

Defendants’ argument is also factually flawed. Contrary to 

what defendants represent in their briefs, Siry’s discovery 

encompassed far more than the issues of alter ego and 

defendants’ financial condition. The mid-October 2013 requests

sought documents involving the workings and finances of—as 

well as each defendant’s interests in—the various entities (416 

South Wall Street, DTLA and Investment Consultants) used to 

effectuate the allegedly improper diversion of the partnership’s 

cash distributions. The January 2014 requests sought documents 

and answers to special interrogatories regarding each defendants’

finances. Together, these requests sought more recent documents 

relevant to show whether defendants had, in fact, improperly 

diverted the partnership’s cash distributions; to show which

defendants had done so, which, as we noted in the prior appeal, 

was “key”; and to show what assets each defendant had available 

to satisfy any verdict for punitive damages. Thus, these requests 

spanned a broad swath of subjects that went to the heart of the 

retrial that Siry, in late 2013 and early 2014, expected to 

prosecute. (Accord, Rawnsley v. Superior Court (1986) 183 
24

Cal.App.3d 86, 91 [discovery seeking documents that would show 

that “assets have been converted and diverted” are “fundamental 

to [a plaintiff’s] case”]; In re Marriage of Michaely (2007) 150 

Cal.App.4th 802, 810 [discovery seeking more updated 

information is appropriate].)

2. Did the trial court err in issuing terminating 

sanctions notwithstanding Neman’s assertion of the privilege 

against self-incrimination?

Neman alone argues that the trial court lacked the 

authority to issue terminating sanctions against him once he 

asserted the privilege against self-incrimination.

a. Additional facts

On September 19, 2014, a federal grand jury in Los Angeles 

indicted Neman, in his capacity as Chief Executive Officer of a 

company called Pacific Eurotex, for evading federal currency 

reporting requirements while laundering drug trafficking 

proceeds. 

Although the indictment occurred long after Siry had 

propounded its discovery requests, after Neman had violated 

numerous court orders compelling production without objections, 

and after the court’s penultimate pre-terminating sanctions 

discovery order of October 9, 2014, Neman on October 22, 2014 

invoked the privilege against self-incrimination in seeking a stay

of this case pending resolution of the criminal case, which the 

trial court denied but then granted a continuance of the trial date 

to account for Neman’s unavailability as a witness. Neman also 

served on October 27, 2014 supplemental discovery responses

objecting to every request “based on his Fifth Amendment 

privilege rights.” The trial court overruled that objection in its 

terminating sanctions order, finding that it was “not going to 
25

relitigate the basis or validity of [its pre-assertion] orders 

[compelling production].” 

b. Analysis

The Fifth Amendment’s guarantee that “[n]o person 

. . . shall be compelled in any criminal case to be a witness 

against himself” operates as a defense to civil discovery, if timely 

asserted. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 15; 

§ 2017.010 [discovery reaches “any matter, not privileged”], italics 

added; Fuller v. Superior Court (2001) 87 Cal.App.4th 299, 305 

(Fuller) [“Privileged matters . . . lie beyond the reach of discovery 

. . .”].) This privilege against self-incrimination reaches only 

those communications that are (1) compelled, (2) testimonial, and 

(3) incriminating. (United States v. Doe (1984) 465 U.S. 605, 611

(Doe).) 

In assessing whether the privilege applies to excuse 

compliance with the Civil Discovery Act, courts ask two 

questions. 

First, is the requested disclosure protected by the privilege? 

Because the responses to Siry’s discovery requests would 

“‘disclose the contents of [Neman’s] mind’” and therefore are

testimonial (Pa. v. Muniz (1990) 496 U.S. 582, 594, quoting 

Curcio v. United States (1957) 354 U.S. 118, 128), the 

applicability of the privilege here turns on whether the discovery 

sought is “incriminating” and “compelled.” As a general matter, a 

communication is “incriminating” if it “furnish[es] a link in the 

chain of evidence needed to prosecute the claimant for a 

. . . crime.” (Hoffman v. United States (1951) 341 U.S. 479, 486

(Hoffman).) And because a litigant’s “say-so does not of itself 

establish the hazard of incrimination” (ibid.), the litigant bears 

the burden of “object[ing] with specificity,” which triggers the 
26

trial court’s duty to “‘conduct[] “a particularized inquiry, deciding, 

in connection with each specific area that the [propounding] party 

seeks to explore, whether or not the privilege is well-founded.’” 

[Citation.]” (Warford v. Medeiros (1984) 160 Cal.App.3d 1035, 

1045 (Warford), italics omitted; In re Marriage of Sachs (2002) 95 

Cal.App.4th 1144, 1151 (Sachs); Alpha Media Resort Investment 

Cases (2019) 39 Cal.App.5th 1121, 1133.)

In assessing whether the special interrogatories are 

privileged in this case, Neman’s answers would be compelled 

(because he was being compelled by the court to respond to 

them), but would be incriminating only if it is “evident from the 

implications of the question, in the setting in which it is asked, 

that a responsive answer to the question or an explanation of 

why it cannot be answered might be dangerous because injurious 

disclosure could result.” (Hoffman, supra, 341 U.S. at pp. 486-

487; People v. Seijas (2005) 36 Cal.4th 291, 304.) In assessing 

whether the production of documents is privileged in this case, 

Neman’s creation of the documents to be produced was not 

compelled because he voluntarily created those documents (Doe,

supra, 465 U.S. at p. 612), but his act of production would be 

compelled (again, because he was being compelled by the court to

produce them). However, his act of production would be 

incriminating only if that act “‘admit[ted]’” facts previously 

unknown to Siry—namely, “‘that the [responsive documents] 

existed, were in his possession or control, and were authentic.’ 

[Citation.]” (United States v. Hubbell (2000) 530 U.S. 27, 36.) 

Second, if the requested discovery responses are found to be 

covered by the privilege, what should the court do about it? 

Because a pending criminal indictment does not give a person “‘a 

blank check to block all civil litigation on the same or related 
27

underlying subject matter,’” the trial court must “assess[]” “‘the 

nature and substantiality of the injustices claimed’” by the 

propounding and responding parties, and seek to “fairly balance” 

their interests, preferably by “accommodat[ing]” those “competing 

interests.” (Fuller, supra, 87 Cal.App.4th at pp. 306-307; Pacers, 

Inc. v. Superior Court (1984) 162 Cal.App.3d 686, 690; Avant! 

Corp. v. Superior Court (2000) 79 Cal.App.4th 876, 882.)

The trial court did not err in overruling Neman’s assertion 

of the privilege against self-incrimination for three reasons.

First, Neman never “object[ed] with specificity.” Instead, 

he responded with a blanket objection to all discovery without 

any attempt to explain how any answers he would provide to the 

special interrogatories or how his act of producing the requested 

documents would incriminate him for crimes involving Pacific

Eurotex, a company nowhere mentioned in this litigation. Such a 

“blanket refusal to testify [or provide discovery responses] is 

unacceptable” and insufficient to constitute an assertion of the 

privilege. (Sachs, supra, 95 Cal.App.4th at p. 1151; Warford,

supra, 160 Cal.App.3d at p. 1044 [“‘[T]here is no blanket Fifth 

Amendment right to refuse to answer questions.’”].) Neman 

responds that he never made a “‘blanket refusal’” because he 

repeated the same boilerplate refusal for each individual 

discovery request, but Neman’s mastery of the cut-and-paste 

feature to refuse to answer each individual request is functionally 

indistinguishable from a blanket refusal. Neman also faults Siry 

for not filing a further motion to compel in order to flesh out 

Neman’s defective invocation of the privilege, but the burden of 

invoking the privilege is on its holder (Sachs, at pp. 1151-1152) 

and we decline to adopt a rule shifting the burden onto the 

opposing party to remedy a defective invocation. 
28

Second, even if we ignored Neman’s defective assertion of 

the privilege, Neman has not carried his burden of showing that 

an “injurious disclosure could result” (Hoffman, supra, 341 U.S. 

at pp. 486-487) by “demonstrat[ing] some ‘nexus’ between the 

information requested [by Siry] and the risk of criminal 

prosecution and conviction.” (Troy v. Superior Court (1986) 186 

Cal.App.3d 1006, 1012.) Neman was indicted for various 

currency transactions involving Pacific Eurotex from 2012 

through 2014; the discovery sought in this case involves the 

dealings of several corporations and a limited partnership—none 

of which Neman contends has any associations with Pacific 

Eurotex—between 2002 and 2010, as well as Neman’s financial 

data from January 2010 through January 2014. The requisite 

nexus is absent. Neman points to his attorney’s declaration, filed 

with a motion to stay or continue the trial, that a nexus exists 

because Neman was charged with money laundering and the 

discovery in this case would require him to respond to questions 

about his financial holdings. However, this explanation—

namely, any question about money is privileged whenever 

someone is charged with money laundering—is at far too high a 

level of generality to establish the requisite showing of a “danger” 

of “injurious disclosure,” especially where, as here, Neman 

operates numerous entities that may or may not have 

intertwined financial dealings. This argument also provides no 

basis for extending the privilege to the non-financial discovery 

sought by Siry’s October 2013 requests for production of 

documents regarding liability.

Neman asserts that he need not establish any nexus 

because (1) his attorneys in the criminal matter recommended 

that he assert the Fifth Amendment privilege in this case, (2) the 
29

trial court has yet to conclude there is no nexus, (3) the trial court 

already determined that there was a nexus because it briefly 

continued the trial on the basis of his Fifth Amendment objection,

(4) a trial court in a different case stayed that case against 

Neman, and (5) this court has already determined that there was 

a nexus because we issued an alternative writ in 2017 directing 

the trial court to sustain Neman’s Fifth Amendment objection to 

six document requests (for the period starting January 1, 2015, 

as limited by the trial court) posed during a 2017 debtor’s 

examination.8

Each of these assertions is meritless. A trial court is 

required to assess for itself whether a “nexus” exists, not just 

take the word of a party’s lawyer on that issue. The trial court 

never ruled on whether there is a nexus between the indictment

and Siry’s discovery because Neman never asserted a specific 

objection; his assertion of an ineffectual, blanket objection does 

not somehow excuse him from having to prove that his 

interrogatory answers and act of producing documents posed a 

danger of incriminating him. The trial court’s grant of a brief 

continuance of trial was due to Neman’s unavailability as a 

witness, not because responding to Siry’s pending discovery 

requests might prove incriminating. (See, e.g., Evid. Code, § 240 

[defining unavailability of a witness].) Whether a nexus exists 

between the pending charges and the allegations of a different 

case says nothing about whether such a nexus exists in this case. 

And our issuance of an alternative writ with regard to specific 

 

8 We grant Neman’s motion to augment the record and for 

judicial notice of documents related to the debtor’s examination 

and writ proceedings. (Evid. Code, §§ 452, subd. (d), & 459, subd. 

(a).)
30

objections Neman made to different document requests covering 

a different time period cannot cure the deficiency of his blanket 

assertion of privilege to Siry’s discovery, particularly when 

Neman ultimately withdrew his writ petition.

Lastly, even if we ignored Neman’s defective assertion of 

the privilege and the absence of any nexus, Neman did not assert 

his Fifth Amendment privilege until October 2014, long after Siry 

propounded its discovery and the trial court repeatedly ordered 

Neman to respond. In arguing that his October 2014 assertion of 

the privilege renders the trial court’s terminating sanctions 

ruling improper, Neman is effectively arguing that a litigant’s 

assertion of the privilege against self-incrimination retroactively 

excuses prior misuse of the discovery process. This argument is 

legally unfounded. (Cf. Brown v. Superior Court (1986) 180 

Cal.App.3d 701, 712 [“privilege against self-incrimination” may 

be “waived by a failure to make a timely objection”].) It is also 

factually unfounded, as the trial court’s terminating sanctions 

order was based upon Neman’s contumacious conduct in ignoring 

the court’s orders, and not upon any assertion of the privilege 

against self-incrimination after those orders were issued. (Cf. 

Alvarez v. Sanchez (1984) 158 Cal.App.3d 709, 712-713 [noting 

that “striking of the defendant’s answer and the resultant default 

procedure are too harsh a sanction for exercising” the privilege 

against self-incrimination].) Contrary to what Neman suggests, 

it also does not matter that Siry amended its operative complaint 

to allege specific damages demands after he (defectively) asserted 

the privilege. He had proper notice of those allegations by the 

time his answer was struck and default was entered (§ 580, subd. 

(a)); more to the point, Neman had the power to assert the 
31

privilege more specifically after Siry amended its complaint but 

nonetheless chose to rest on his defective, blanket objection. 

3. Is the trial court’s finding that Farkhondehpour

never complied with its orders supported by substantial evidence?

Farkhondehpour alone argues that he did, in fact, comply 

with the trial court’s multiple orders compelling responses, 

without objection, to Siry’s October 2013 and January 2014 

discovery requests. 

Farkhondehpour certainly responded to Siry’s discovery 

requests. In response to Siry’s October 2013 requests for 

production, Farkhondehpour filed (1) untimely responses with 

objections in February 2014 explaining why he was not going to 

provide any responsive documents because the documents sought 

(a) pertained to non-compensable damages (that is, damages 

waived when the prior lawsuit between the parties was settled in 

2007), (b) had already been produced prior to remand (but 

additional copies would be made available at Farkhondehpour’s 

office), or (c) did not exist; and (2) supplemental responses in 

June 2015 that (a) preserved objections, and (b) explained why he 

was still not going to provide any responsive documents because 

the documents sought (i) had already been produced or were 

otherwise in Siry’s possession, (ii) never existed, or (iii) were 

“available” for inspection at Investment Consultants’s offices. In 

response to Siry’s January 2014 requests, Farkhondehpour filed 

(1) a single blanket objection in April 2014 explaining that he was 

not going to provide any responsive documents or answer any 

interrogatories because the discovery sought was “unnecessarily 

burdensome, harassing and overbroad”; and (2) supplemental 

responses in June 2015 that (a) preserved objections, (b) 

explained that any documents responsive to the production 

requests did not exist or were “available” for inspection at 
32

Investment Consultants’s office, (c) provided answers to the vast 

majority of the special interrogatories (54 out of the 65 posed to 

Farkhondehpour individually and 80 out of the 112 posed to 

Farkhondehpour as trustee) that the interrogatory was “not 

applicable,” had no response, or was duplicative, and (c) provided 

answers to the remaining interrogatories and attached eight 

pages of spreadsheets.

Substantial evidence supports the trial court’s finding that 

these responses did not constitute compliance. Farkhondehpour

was ordered to produce every document requested and answer

every special interrogatory posed without objection. 

Farkhondehpour never did so. Farkhondehpour points to his 

offers to open up the doors to his (or Investment Consultants’s)

warehouse for Siry to come in and hunt for documents. But this 

is not what the trial court ordered. To treat Farkhondehpour’s 

“[l]ast-minute tender of documents” as wiping away the prior 16 

to 20 months of intransigence would impermissibly “reward 

. . . brinksmanship.” (Sauer v. Superior Court (1987) 195 

Cal.App.3d 213, 230.) Farkhondehpour says that he provided 

Siry with financial documents pertaining to four different 

companies during settlement negotiations, but those documents 

constituted an infinitesimal portion of the requested discovery. 

Farkhondehpour lastly asserts that Siry judicially admitted that 

it had received satisfactory responses to its discovery responses;

this is a flat-out misrepresentation of the record.

II. Amount of the Default Judgment

Defendants challenge the trial court’s award of (1) treble 

damages under Penal Code section 496, subdivision (c), and (2) 

attorney fees. In its cross-appeal, Siry challenges the trial court’s 

recalculation of treble damages, its reduction in punitive 
33

damages, and its requirement that Siry elect between treble and 

punitive damages on the ground that defendants lacked standing 

to make the motion for new trial that prompted the court to 

reduce the amount of the default judgment.9 We will address the 

second issue first.

A. Standing to move for a new trial

Siry argues the trial court erred in amending the default 

judgment in response to defendants’ motion for new trial not 

because the amendments were incorrect, but because defendants, 

as parties in default, did not have standing to make such a 

motion at all. Because this argument requires us to construe the 

new trial statute and resolve other questions of law, our review is 

de novo. (John v. Superior Court (2016) 63 Cal.4th 91, 95 (John); 

Greene v. Marin County Flood Control & Water Conservation 

Dist. (2010) 49 Cal.4th 277, 287.)

An “aggrieved party” may move the trial court to “vacate[]” 

a “verdict” or “other decision” and “grant[]” “a new or further 

trial” if, among other reasons, that party can show an “[e]rror in 

law, occurring at the trial and excepted to by the party making 

the application” if that error “materially affect[ed] [its] 

substantial rights.” (§ 657, subd. (7).) But may a “party” in 

 

9 Defendants do not challenge the trial court’s calculation of 

actual damages, and Siry does not challenge the court’s

requirement that Siry elect between treble and punitive 

damages, the reduction in the punitive damages award, or the 

offset for costs defendants incurred during the prior appeal. And 

although Siry suggests that the trial court’s calculation of treble 

damages was incorrect, we decline to entertain that suggestion 

because Siry waited until its reply brief to raise it. (Garcia, 

supra, 16 Cal.4th at p. 482, fn. 10.)
34

default move for a new trial when, by virtue of the default, there 

was no trial in the first place?

We conclude that the answer is “yes,” at least when the 

party is seeking to move for a new trial on the ground that the 

court made an “error in law” in calculating damages. Although 

the entry of default precludes the defaulting defendant from 

further participation in the proceedings (and thus from 

“except[ing] to” the error during the prove-up hearing) (Devlin v. 

Kearny Mesa AMC/Jeep/Renault (1984) 155 Cal.App.3d 381, 385

(Devlin); Forbes v. Cameron Petroluems, Inc. (1978) 83 

Cal.App.3d 257, 262; Christerson v. French (1919) 180 Cal. 523, 

525), the plaintiff still bears the burden of proving its entitlement 

to damages to the court. (Barragan v. Banco Bch (1986) 188 

Cal.App.3d 283, 302; § 585, subd. (b).)

More to the point, the entry of default does not entirely 

render a defaulting defendant persona non grata. Even a 

defaulting defendant may appeal the resulting default judgment 

on the grounds that the damages award (1) “is so 

disproportionate to the evidence as to suggest that the verdict 

was the result of passion, prejudice or corruption” (Uva v. Evans

(1978) 83 Cal.App.3d 356, 363 (Uva)), (2) “is so out of proportion 

to the evidence that it shocks the conscience of the appellate 

court” (ibid.), or (3) is “contrary to law” (see Lasalle v. Vogel

(2019) 36 Cal.App.5th 127, 139 [defaulting party may appeal 

refusal to set aside verdict on these grounds]). 

Because a defaulting defendant can appeal a default 

judgment on these grounds, “[w]e see no reason to preclude [that 

defendant] from seeking a new trial (or, more precisely, a new 

judgment hearing) on th[ose] ground[s] . . .” (Don v. Cruz (1982) 

131 Cal.App.3d 695, 704 (Don); Jacuzzi v. Jacuzzi Bros. (1966) 
35

243 Cal.App.2d 1, 23-24; Misic v. Segars (1995) 37 Cal.App.4th 

1149, 1154.) Allowing a defaulting party to bring excessive 

damages based on errors in law to the trial court’s attention in a 

new trial motion puts those potential errors before the court with 

greater familiarity with the case, does so in a manner likely to 

yield a faster result, and may thereby altogether obviate the need 

for an appeal. (Accord, Don, at p. 705.) Our Supreme Court has 

held that parties may not “challenge [a] damage award on 

appeal[] without [first making] a motion for a new trial”; to do 

otherwise is to “unnecessarily burden the appellate courts with 

issues which can and should be resolved at the trial level.” 

(Shroeder v. Auto Driveway Co. (1974) 11 Cal.3d 908, 919.) That 

logic applies with equal force here.

Siry resists this conclusion with four arguments.

First, it cites language from Howard Greer Custom 

Originals v. Capritti (1950) 35 Cal.2d 886 (Howard Greer), where 

our Supreme Court stated that a defaulting defendant “cannot 

. . . move for a new trial” because it “is out of court and is not 

entitled to take any further steps in the” case. (Id. at pp. 888-

889.) Seven years later, however, the Supreme Court in Carney 

v. Simmonds (1957) 49 Cal.2d 84 (Carney), retreated from 

Howard Greer’s sweeping language when it held that a new trial 

motion is appropriate in many different situations “except 

possibly in the case of default judgments . . . where there may be 

the question of the right of the moving party to make any 

objection to the judgment.” (Id. at p. 90.) Because defaulting 

defendants may appeal the damages award of a default judgment 

in the three circumstances delineated above, they have the “right 

. . . to make an[] objection to the judgment” and thus, under 
36

Carney, may also move for a new trial in those same 

circumstances. 

Second, Siry urges that a close reading of the cases 

allowing defaulting defendants to move for a new trial reveals a 

four-part classification scheme, and that under that scheme, only 

defendants who challenge damages as being excessive due to 

insufficiency of the evidence (rather than due to legal errors) may 

file a motion for new trial. This makes sense, Siry continues, 

because the plaintiff at a default prove-up hearing can be faulted 

only for presenting insufficient evidence but not for errors in law

made by the court. None of the cases Siry cites even hints at the 

rule Siry purports to draw from them; indeed, some have nothing 

to do with excessive damages at all. More to the point, Siry’s 

proffered rule is wholly inconsistent with the judicial economybased rationale for allowing defaulting defendants to file a 

motion for new trial as to legal errors they can challenge on 

appeal because Siry’s rule would preclude new trial motions for 

issues that are clearly subject to challenge on appeal. What is 

more, Siry’s proffered blame-based rationale for its rule is a 

fiction, as the facts of this case vividly illustrate. Siry is the 

party who urged the trial court to award quadruple damages on 

top of punitive damages and who then offered a spirited defense 

of that position in opposing defendants’ motion for new trial, 

rendering hollow its claim on appeal that plaintiffs are invariably

blameless for a trial court’s legal errors.

Third, Siry contends that a defaulting party’s right to 

challenge disproportionate or legally erroneous damages awards 

on appeal should, at best, authorize that party to file a motion for 

relief under section 473, but not a motion for new trial. But 

section 473 provides relief for mistakes made by a party or its 
37

counsel (§ 473, subd. (b)) and for void judgments (id., subd. (d)), 

and provides no relief for errors of law by a court in awarding 

“damages which are excessive as a matter of law.” (Don, supra, 

131 Cal.App.3d at pp. 702-703.) The proper vehicle for getting 

such issues before the trial court that entered the default 

judgment is a motion for new trial.

Fourth, Siry cites cases holding that a defaulting defendant 

may not file a motion for new trial under any circumstances. 

(E.g., Devlin, supra, 155 Cal.App.3d at pp. 385-386; Brooks v. 

Nelson (1928) 95 Cal.App. 144, 147-148.) We respectfully part 

ways with these decisions, which did not consider the rationale 

we adopt—namely, that there is no reason to deprive the trial 

court of the power to consider challenges to the excessiveness or 

legal propriety of damages when those very same issues can 

undoubtedly be raised on appeal. 

In this case, defendants’ challenges to the damages 

awarded in the original default judgment all constitute “error[s]

in law” properly subject to a motion for a new trial. The court’s 

recalculation of treble damages reduced what was effectively 

quadrupled damages down to treble damages; the court’s 

reduction of the punitive damages award was grounded in the 

constitutional law defining when such damages become so 

excessive as a matter of law as to deny a defendant due process; 

and the court’s ruling that Siry must elect between treble and 

punitive damages involved construction of the law. (Cf. Seffert v. 

Los Angeles Transit Lines (1961) 56 Cal.2d 498, 507 [only trial 
38

court may sit as a “thirteenth juror” in evaluating the amount of 

damages].)10 

 

10 Because these reasons for granting a new trial all involve 

“error[s] in law” cognizable under subdivision (7) of section 657

rather than any reweighing of the evidence (Glendale Fed. Sav. & 

Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 

101, 122 [distinguishing challenges to the excessiveness of 

damages based on the evidence presented from a court’s “failure 

to apply the proper legal measure of damages”]; Gober v. Ralph’s 

Grocery Co. (2006) 137 Cal.App.4th 204, 214 [“in deciding the 

constitutional maximum [for punitive damages], a court does not 

decide whether the verdict is unreasonable based on the facts”]), 

Siry’s belatedly developed argument that the trial court’s new 

trial order is void because it cites subdivision (5) of section 657 is 

not well taken. To be sure, the court cited only subdivision (5) 

and that subdivision requires a trial court to “weigh[] the 

evidence” (§ 657, second paragraph). But it is clear from the trial 

court’s reasons for granting a new trial that the court cited the 

wrong statutory ground for relief. A court’s failure to state the 

proper ground for relief under section 657 does not abrogate its 

reasons for granting that relief. (Oakland Raiders v. National 

Football League (2007) 41 Cal.4th 624, 634 [“‘the words “ground”

and “reason” have different meanings,’” and “[t]he word ‘ground’ 

refers to any of the seven grounds listed in section 657”]; Previte 

v. Lincolnwood, Inc. (1975) 48 Cal.App.3d 976, 988 [reviewing 

court is “confined” “to the specific reason or reasons given by the 

trial court for [its new trial] order”], italics added.) More to the 

point, it does not void the new trial order (Sandoval v. Qualcomm 

Inc. (2018) 28 Cal.App.5th 381, 421-424 [trial court’s citation to 

the “wrong subdivision” of section 657 does not void new trial 

order when its reason was valid under a different subdivision], 

review granted on other grounds, Jan. 16, 2019, S252796; see 

also Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 892, 906 

[trial court’s failure to specify ground for relief does not void its 

new trial order]), at least where, as here, a new trial was sought 
39

B. Propriety of certain damages awards

Defendants argue that the trial court erred in awarding 

treble damages under Penal Code section 496, subdivision (c) and 

in awarding attorney fees. When entering judgment against a 

defaulting defendant, a trial court acts as a “gatekeeper,” not a 

rubber stamp. (Kim v. Westmoore Partners, Inc. (2011) 201 

Cal.App.4th 267, 272 (Kim); Electronic Funds, supra, 134 

Cal.App.4th at p. 1179.) This is a “serious” and sober 

responsibility (Kim, at pp. 272-273), requiring the court to assure 

itself that the plaintiff has made a “prima facie case” showing 

entitlement to each type of damages under (1) the relevant 

statute, contract, or legal doctrine, and (2) the well-pled 

allegations in its operative complaint. (Johnson v. Stanhiser

(1999) 72 Cal.App.4th 357, 361-362; Los Defensores, supra, 223 

Cal.App.4th at pp. 392-393.) In undertaking this task, the court 

must accept as true all “well-pled[] allegations” in the operative 

complaint, but need not accept “contentions, deductions or 

conclusions of fact or law.” (Evans, supra, 38 Cal.4th at p. 6.) 

Where, as here, the relief challenged on appeal has “penal 

attributes” (as both treble damages and attorney fees do (Rony v. 

Costa (2012) 210 Cal.App.4th 746, 757 (Rony))), the trial court 

must also require the plaintiff to “strict[ly] compl[y]” with all 

statutory prerequisites for that relief (Baker v. San Francisco Gas 

& Electric Co. (1904) 141 Cal. 710, 712). We independently 

review a trial court’s ruling that the complaint entitles a plaintiff 

 

on the ground corresponding with the trial court’s reasons 

(Collins v. Sutter Memorial Hospital (2011) 196 Cal.App.4th 1, 

16-17 [“A new trial order ‘can be granted only on a ground 

specified in the motion.’”], citation omitted).
40

to damages where, as here, that ruling rests on questions of 

statutory interpretation and the application of undisputed facts 

to the law. (John, supra, 63 Cal.4th at p. 95; Martinez v. 

Brownco Construction Co. (2013) 56 Cal.4th 1014, 1018.) 

1. Treble damages and attorney fees under Penal 

Code section 496, subdivision (c)

Penal Code section 496 is entitled “Receiving or concealing 

stolen property.” (Pen. Code, § 496.) Subdivision (a) makes it a 

crime to (1) “buy[] or receive[] any property that has been stolen 

or that has been obtained in any manner constituting theft or 

extortion, knowing the property to be so stolen or obtained,” or (2) 

“conceal[], sell[], [or] withhold[] any property from the owner, 

knowing the property to be so stolen or obtained.” (Id., subd. (a).) 

Subdivision (c) empowers “[a]ny person who has been injured by 

a violation of subdivision (a)” to “bring an action for three times 

the amount of actual damages [he has ] . . . sustain[ed]” as well as 

for “costs of suit[] and reasonable attorney’s fees.” (Id., subd. (c).) 

This case presents the question: Does Penal Code section 

496, subdivision (c) authorize Siry to obtain treble damages 

where the underlying conduct did not involve trafficking in stolen 

property, but rather the improper diversion of a limited 

partnership’s cash distributions through fraud, 

misrepresentation, and breach of fiduciary duty?

The courts have taken different approaches to the issue.

Siry urges that we follow Switzer, supra, 35 Cal.App.5th 

116, Bell v. Feibush (2013) 212 Cal.App.4th 1041 (Bell), 

Worldwide Travel, Inc. v. Travelmate US, Inc. (S.D. Cal. 2016) 

2016 U.S. Dist. LEXIS 43942 (Worldwide Travel), and Allure 

Labs, Inc. v. Markushevska (N.D. Cal. 2019) 606 B.R. 51, 63-66 

(Allure Labs). These cases hold that treble damages are available 

whenever the defendant’s underlying conduct involves any type of 
41

fraudulent conduct or misrepresentation. (Switzer, at pp. 119-

120 [fraud, conversion of property; treble damages available]; 

Bell, at p. 1043 [theft by false pretense; treble damages 

available]; Worldwide Travel, at *18-23 [conversion, theft by false 

pretenses; treble damages available]; Allure Labs, at pp. 57-58 

[embezzlement; treble damages available].) Their holdings rest 

on a literal reading of the Penal Code: Section 496, subdivision 

(a) reaches the “recei[pt of] . . . property . . . that has been 

obtained in any manner constituting theft” (Pen. Code, § 496, 

subd. (a), italics added), and “theft” is elsewhere defined to 

include “fraudulently appropriat[ing] property which has been 

entrusted to him or her” or “knowingly and designedly, by any 

false or fraudulent representation or pretense, defraud[ing] any 

other person of money, labor or real or personal property” (id., 

§ 484, subd. (a)), so Penal Code section 496, subdivision (c) must 

authorize treble damages for any type of conduct qualifying as 

“theft,” including fraud, conversion, and theft by false pretenses. 

(Switzer, at pp. 126-131; Bell, at pp. 1045-1049.)

Defendants urge that we follow Lacagnina v. Comprehend 

Systems, Inc. (2018) 25 Cal.App.5th 955 (Lacagnina), Grouse 

River Outfitters Ltd. v. NetSuite, Inc. (N.D. Cal. 2016) 2016 U.S. 

Dist. LEXIS 141478 (Grouse River), and Agape Family Worship 

Ctr., Inc. v. Gridiron (C.D. Cal. 2018) 2018 U.S. Dist. LEXIS 

91338 (Agape Family). For various reasons, each of these cases 

has rejected Bell’s declaration that “[a]nything that could be the 

subject of a theft can also be property under Penal Code section

496” (Bell, supra, 212 Cal.App.4th at p. 1049). Lacagnina viewed 

Bell’s declaration as “broad dictum,” and went on to reject the 

plaintiff’s argument that Penal Code section 496 applied to a 

theft of labor; “that labor may be the object of a ‘theft,’” 
42

Lacagnina reasoned, “does not transform it into ‘stolen 

property.’” (Id. at pp. 969-970.) Grouse River and Agape Family

both rejected treble damages because, in their view, the civil 

defendant’s initial “theft” of the property through fraud precluded 

treble damages for the simultaneous act of receiving that “stolen” 

property. (Grouse River, at *38-40; Agape Family, at *1-2, 14-15.)

We chart yet a different path in ruling that treble damages 

are not available under Penal Code section 496, subdivision (c) in 

cases where the plaintiff merely alleges and proves conduct 

involving fraud, misrepresentation, conversion, or some other 

type of theft that does not involve “stolen” property. 

The “first task” of any court “in construing a statute is to 

ascertain the intent of the Legislature so as to effectuate the 

purpose of the law.” (Dyna-Med, Inc. v. Fair Employment & 

Housing Com. (1987) 43 Cal.3d 1379, 1386.) Although “the words 

of [a] statute” “[o]rdinarily” “provide the most reliable indication 

of legislative intent” (People v. Vidana (2016) 1 Cal.5th 632, 638), 

this “‘plain meaning’ rule does not prohibit a court from 

determining whether the literal meaning of a statute comports 

with its purpose.” (Lungren v. Duekmejian (1988) 45 Cal.3d 727, 

735).

Time and again, our Supreme Court has refused to 

“‘presume that the Legislature intends, when it enacts a statute, 

to overthrow long-established principles of law unless such 

intention is clearly expressed or necessarily implied.’” (Brodie v. 

Workers’ Comp. Appeals Bd. (2007) 40 Cal.4th 1313, 1325, 

quoting People v. Superior Court (Zamudio) (2000) 23 Cal.4th 

183, 199); Van Horn v. Watson (2008) 45 Cal.4th 322, 333, 

superseded by statute on another ground as stated in Ennabe v. 

Manosa (2014) 58 Cal.4th 697, 719.) The reason for this refusal 
43

is a pragmatic one—namely, that “[i]t is doubtful that the 

Legislature would . . . institute[] . . . significant change through 

silence.” (Riverside County Sheriff’s Dept. v. Stiglitz (2014) 60 

Cal.4th 624, 646-647; see also In re Christian S. (1994) 7 Cal.4th 

768, 782 [“reject[ing] the view that the Legislature silently enacts 

major social policy”].)

In our view, reading Penal Code section 496 to authorize an 

award of treble damages whenever a plaintiff proves (or, in the 

case of a default, sufficiently alleges) any type of theft—whether 

it be fraud, misrepresentation, conversion, or breach of fiduciary 

duty—by which the defendant obtains money or property would 

institute a “significant change” for two reasons. 

First, it would transmogrify the law of remedies for those 

torts. Until now, the damages remedy for these torts has been 

limited to the amount of damages actually caused by the fraud, 

misrepresentation, conversion or breach of fiduciary duty. (Civ. 

Code, § 3333 [defining damages “[f]or the breach of an obligation 

not arising from contract” as “the amount which will compensate 

for all the detriment proximately caused thereby . . .”]; Fragale v. 

Faulkner (2003) 110 Cal.App.4th 229, 236 [applying this measure 

of damages to tort of fraud not involving real property]; Benson v. 

Southern California Auto Sales, Inc. (2015) 239 Cal.App.4th 

1198, 1208 [applying this measure of damages to tort of 

misrepresentation]; Michelson v. Hamada (1994) 29 Cal.App.4th 

1566, 1583 [applying this measure of damages to tort of breach of 

fiduciary duty]; Persson v. Smart Inventions, Inc. (2005) 125 

Cal.App.4th 1141, 1165 [“fraud damages are [calculated] under 

the out-of-pocket loss rule”]; Civ. Code, § 3336 [damages for 

wrongful conversion is the “value of the property at the time of 

the conversion” plus “fair compensation for the time and money 
44

properly expended” in its pursuit].) Treble damages under Penal 

Code section 496, if held applicable to these torts, would all but 

eclipse these traditional damages remedies. (Accord, Lacagnina, 

supra, 25 Cal.App.5th at p. 972 [“If every plaintiff in an 

employment or contract dispute could also seek treble damages” 

under Penal Code section 496, “such claims would become the 

rule rather than the exception”].) 

Second, reading Penal Code section 496 to apply in theftrelated tort cases would effectively repeal the punitive damages 

statutes. (California Cannabis Coalition v. City of Upland (2017) 

3 Cal.5th 924, 945 [noting “strong presumption” against “implied 

repeal”].) Until now, a plaintiff seeking greater than 

compensatory damages had to prove, by clear and convincing 

evidence, that the defendant was “guilty of oppression, fraud, or 

malice.” (Civ. Code, § 3294, subd. (a).) If Penal Code section 496 

applied to these torts, a plaintiff could obtain treble damages 

merely by proving the tort itself by a preponderance of the 

evidence. (Evid. Code, §§ 500, 115 [preponderance of the 

evidence is the default burden in civil cases].)11

What is more, our Legislature has not shouted, stated, or 

even whispered anything about Penal Code section 496 effecting

such a “significant change” to the universe of tort remedies. 

Rather, the Legislature had a far more targeted goal in mind 

 

11 Because Penal Code section 496, subdivision (c) authorizes 

an award of attorney fees along with treble damages, extending 

its reach beyond the context of stolen property would have a third 

significant effect: It would authorize fee shifting in nearly every 

tort cause involving fraud, misrepresentation, or breach of 

fiduciary duty, thereby creating a gaping exception to the general 

rule against such fee shifting. (§ 1021).
45

when it enacted Penal Code section 496’s treble damages 

remedy—namely, “to dry up the market for stolen goods.” (Bell,

supra, 212 Cal.App.4th at p. 1047.) Penal Code section 496’s 

focus on stolen goods is reflected in the statute’s title, which 

specifies that it deals with “Receiving stolen property.” (People v. 

Hull (1991) 1 Cal.4th 266, 272 [“‘“section headings”’” “‘are 

entitled to considerable weight’” “‘“in determining legislative 

intent”’”], citation omitted.) It is reflected in the traditional 

understanding of the crime defined in Penal Code section 496, 

subdivision (a), which requires proof that “(1) the property was 

stolen; (2) the defendant knew the property was stolen; and, (3) 

the defendant had possession of the stolen property.” (People v. 

Land (1994) 30 Cal.App.4th 220, 223.) And it is reflected in

Penal Code section 496, subdivision (c)’s legislative history, which 

is replete with discussions about how best to achieve the “goal of 

eliminating markets for stolen property, in order to substantially 

reduce the incentive to hijack cargo from common carriers.” 

(Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 

Cal.App.4th 1, 17-18, overruled on other grounds as stated in

Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337

(Kwikset).) Although the Legislature ultimately opted not to 

limit the treble damages remedy to actions against “public 

carriers,” its focus never strayed from drying up the market for 

stolen goods. (Ibid., italics omitted) Because imposing treble 

damages in cases alleging fraud, misrepresentation, breach of 

fiduciary duty and other torts outside the context of stolen 

property does nothing to “advance the legislative purpose to ‘dry 

up the market for stolen goods,’” we cannot even infer any 

legislative intent to affect this significant change.
46

The Legislature’s silence is even more deafening when 

contrasted with other statutes that speak with a much clearer 

voice in creating the extraordinary remedy of treble damages. 

(E.g., Bus. & Prof. Code, § 16750, subd. (a) [treble damages 

available for violations of the Cartwright Act setting state 

antitrust laws]; id., § 17082 [treble damages available for 

violations of the Unfair Competition Law]; Civ. Code, §§ 52, subd. 

(a) & 54.3, subd. (a) [treble damages available for violations of the 

Unruh Civil Rights Act]; id., § 1719, subd. (a)(2) [treble damages 

available to payee for passing checks with insufficient funds]; id., 

§ 3345 [treble damages available “in actions brought by, on behalf 

of, or for the benefit of senior citizens or disabled persons . . . to 

redress unfair or deceptive acts or practices or unfair methods of 

competition”]; Gov. Code, § 12651, subd. (b) [treble damages 

available for violations of the False Claims Act]; Lab. Code, 

§ 230.8, subd. (d) [treble damages available for denying 

employees’ wages “to engage in child-related activities” protected 

by statute]; see also 18 U.S.C. § 1964(c) [treble damages available 

under the federal Racketeer Influenced and Corrupt 

Organizations Act].)

Because we cannot presume that our Legislature intended 

to so significantly alter the universe of tort remedies without 

saying anything about its desire to do so, we conclude that Penal 

Code section 496’s language sweeps more broadly than its intent 

and hold that it does not provide the remedy of treble damages 

for torts not involving stolen property. We recognize that 

Switzer, and to a lesser extent, Bell, came to the contrary 

conclusion based on their view that Penal Code section 496’s 

language was controlling. Switzer took an additional step, noting 

that legislative intent can sometimes trump a statute’s plain 
47

language, but choosing to focus on whether extending treble 

damages to all tort cases involving “theft” was such an outlandish 

outcome as to be deemed “absurd.” (Switzer, supra, 35 

Cal.App.5th at pp. 129-131.) As explained above, we take the 

path Switzer chose not to take and conclude that Penal Code 

section 496’s language diverges from the Legislature’s intent and 

that its narrower intent is controlling. 

Siry’s final salvo is to assert that it properly alleged a 

violation of Penal Code section 496 in its operative complaint. 

That may be true, but it is irrelevant because, as we now hold, 

Penal Code section 496—no matter how well it is pled—does not 

provide the remedy of treble damages based on the underlying 

allegations in this case.

In light of the unavailability of treble damages under Penal 

Code section 496, Siry’s election to receive treble damages over 

punitive damages is a nullity; in its place, Siry is entitled to 

receive the $1 million in punitive damages assessed against each 

Farkhondehpour and Neman.

2. Attorney fees

As a general rule, California follows the so-called 

“American rule” when it comes to attorney fees: Parties in civil 

litigation bear their own unless a statute or contract provides 

otherwise. (§ 1021; Eden Township Healthcare Dist. v. Eden 

Medical Center (2013) 220 Cal.App.4th 418, 425.) The trial court 

awarded Siry attorney fees under two statutes—namely, Penal 

Code section 496, subdivision (c), and section 1029.8. The fee 

award under Penal Code section 496 was in error because, as we 

hold above, that statute does not reach the type of conduct 

involved in this case. 
48

This leaves section 1029.8 as the sole basis for attorney 

fees. That statute empowers a trial court to award “all costs and 

attorney’s fees” against “[a]ny unlicensed person who causes 

injury or damage to another person as a result of providing goods 

or performing services for which a license is required.” (§ 1029.8, 

subd. (a).) The court found a fee award under section 1029.8 to 

be appropriate because defendants acted as (1) unlicensed 

construction contractors, and (2) unlicensed broker-dealers. We 

separately consider each basis for the award.

a. Did defendants act as unlicensed 

contractors involved in construction activity?

California requires “person[s] engaged in the business or 

acting in the capacity of a contractor” to be licensed. (Bus. & 

Prof. Code, § 7031.) For these purposes, and as pertinent here, a 

“contractor” is “any person who [(1a)] undertakes to or [(1b)] 

offers to undertake to, or [(1c)] purports to have the capacity to 

undertake to, or [(1d)] submits a bid to, or [(1e)] does himself or 

herself or by or through others [(2)] construct, alter, repair, add 

to, subtract from, improve, move, wreck or demolish any building 

. . .” (Id., § 7026.) Requiring contractors to be licensed 

“provide[s] minimal assurance that all persons offering such 

services in California have the requisite skill and character, 

understand applicable . . . laws and codes, and know the 

rudiments of administering a contracting business.” (Hydrotech 

Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 995.)

As construed by the courts, a “contractor” is only a person 

or entity who (1) actually performs construction services 

(Contractors Labor Pool, Inc. v. Westway Contractors (1997) 53 

Cal.App.4th 152, 165 (Westway); WSS Industrial Construction, 

Inc. v. Great West Contractors, Inc. (2008) 162 Cal.App.4th 581, 

587-593 (WSS Industrial); (2) “supervise[s] the performance of 
49

construction services” (Westway, at p. 165; WSS Industrial, at p. 

593 [“overseeing” construction work]); or (3) agrees by contract to 

be “‘solely responsible’” for construction services (Vallejo 

Development Co v. Beck Development Co. (1994) 24 Cal.App.4th 

929, 935-936, 939-940 (Vallejo Development)). In the last two 

scenarios, a license is required even if the construction work is 

actually performed by someone else. (Bus. & Prof. Code, § 7026 

[reaching work “by or through others”]; Vallejo Development, at p. 

941.) However, a license is not required if a person or entity 

merely coordinates construction services performed by others 

(The Fifth Day, LLC v. Bolotin (2009) 172 Cal.App.4th 939, 947-

950), or supplies labor for those services (Westway, at pp. 164-

165).

In its operative complaint, Siry alleged the following in 

support of its entitlement to attorney fees by virtue of defendants’ 

status as unlicensed contractors:

“Although the construction done at the 241 

property was performed by a third party, companies 

controlled by the defendants, including Investment 

Consultants, received construction management fees 

even though none of the defendants or their 

companies had a contractor’s license. As a result, 

defendants deprived Siry of its share of the 

partnership funds based on defendants’ payment of 

partnership funds (as construction management fees) 

to entities controlled by them. By doing so, 

defendants obtained the benefits of construction work 

at Siry’s expense because Siry had no ownership 

interest in the entities controlled by defendants. In 

addition, without a license, defendants, by 

themselves and through others, engaged in, or 

managed, construction activities, thus meeting the 

definition of a contractor under Bus. & Prof. Code 
50

§ 7026. For example, defendant Saeed 

Farkhondehpour performed construction 

management activities without a license by 

supervising the work. Finally, by entering into a 

construction contract with an unlicensed contractor 

and/or by making payments to an unlicensed 

contractor, defendants aided and abetted unlicensed 

construction.”

These allegations do not entitle Siry to attorney fees under 

section 1029.8 for two reasons.

First, as to every defendant but Farkhondehpour, Siry has 

not sufficiently alleged that they qualify as “contractors” in the 

first place. Siry’s conclusory allegation that defendants “meet[] 

the definition of a contractor” is a “conclusion of fact or law” that 

we must disregard. (Evans, supra, 38 Cal.4th at p. 6.) And Siry’s 

more specific allegations fare no better because they do not allege 

that these defendants actually performed any construction 

services, supervised any construction services, or agreed by 

contract to be solely responsible for construction services. 

Without such allegations, these defendants are not themselves 

“contractors.” They also cannot be held liable for attorney fees 

under section 1029.8 because the statute imposes liability against 

those who are unlicensed contractors, not those who use

unlicensed contractors. (Rony, supra, 210 Cal.App.4th at p. 757 

[noting that section 1029.8 “contains no language . . . extending 

its reach to those who ‘use’ the services of unlicensed persons”].) 

Second, and as to all defendants, Siry has not alleged that 

it suffered “injury or damage . . . as a result of” defendants’

“perform[ance of services] for which a license is required.” 

(§ 1029.8, subd. (a), italics added.) As set forth above, Siry’s sole 

allegation in this regard is that it was harmed by “defendants’ 

payment of partnership funds (as construction management fees) 
51

to entities controlled by [defendants].” However, the harm 

occasioned by this diversion of partnership funds would have 

occurred—and, under defendants’ theories for recovery, would 

have been improper—even if each defendant had a contractor’s 

license. Where an “injury ‘“would have happened anyway, 

whether or not the defendant”’” engaged in tortious behavior, 

then that tort “‘“was not a cause in fact, and of course cannot be 

the legal or responsible cause”’” of that injury. (Grotheer v. 

Escape Adventures, Inc. (2017) 14 Cal.App.5th 1283, 1303; Toste 

v. CalPortland Construction (2016) 245 Cal.App.4th 362, 370.) 

Because Siry failed to allege that defendants’ unlicensed status is 

what caused its injury, Siry failed to show that its injury was “as 

a result of” that unlicensed status, as required by section 1029.8. 

(See Kwikset, supra, 51 Cal.4th at p. 326 [“‘The phrase ‘as a 

result of’ in its plain and ordinary sense means ‘caused by’ and 

requires a showing of a causal connection or reliance on the 

alleged misrepresentation.’ [Citation.]”].) Siry’s sole rejoinder is 

to argue that defendants’ deprivation of Siry’s “share of 

partnership funds . . . based on their construction-related 

shenanigans . . . trigger[ed] attorney’s fees under section 1029.8. 

End of story.” This argument labors under the same 

misconception as Siry’s complaint—namely, that awarding 

attorney fees under section 1029.8 requires no causal link 

between the lack of a license and harm to the plaintiff. Section 

1029.8’s plain language forecloses this argument.

b. Did defendants act as unlicensed brokerdealers selling securities?

California law prohibits any “broker-dealer” from 

“effect[ing] any transaction in, or induc[ing] or attempt[ing] to 

induce the purchase or sale of, any security . . . unless the brokerdealer” is licensed. (Corp. Code, § 25210.) A “broker-dealer” is 
52

“any person engaged in the business of effecting transactions in 

securities in this state for the account of others or for [his] own 

account.” (Id., § 25004, subd. (a).) And a “security” is defined by 

reference to a long list of investment vehicles (id., § 25019), 

although that list is meant to be “illustrative” rather than 

exhaustive (People v. Graham (1985) 163 Cal.App.3d 1159, 1164 

(Graham)). Given this approach, “the ‘critical question’ . . . is 

whether [the] transaction [at issue] falls within the regulatory 

purpose of the law regardless of whether it involves an 

instrument [or vehicle] which comes within the literal language 

of the definition.” (People v. Figueroa (1986) 41 Cal.3d 714, 735.) 

The purpose of this licensing law is “‘to protect the public against 

the imposition of unsubstantial, unlawful and fraudulent stock 

and investment schemes and the securities based thereon.’ 

[Citation.]” (Id. at p. 736.) 

As construed by the courts, an investment vehicle 

constitutes a security if it satisfies one of two tests: (1) the “riskcapital test” first articulated in Silver Hills Country Club v. 

Sobieski (1961) 55 Cal.2d 811 (Silver Hills), or (2) the “federal 

test” first articulated in SEC v. W.J. Howey Co. (1946) 328 U.S. 

293 (Howey). (See generally, People v. Black (2017) 8 Cal.App.5th 

889, 900.) 

In its operative complaint, Siry alleges the following in 

support of its entitlement to attorney fees by virtue of defendants’ 

status as unlicensed broker-dealers selling securities:

“The creation/sale of the limited partnership 

interest at issue here qualifies as a security (i.e., an 

investment contract) as defined by Corporations Code 

section 25019. [Siry] was damaged as a result of 

defendants’ unlicensed activities in violation of 

Corporations Code section 25004 [governing broker 
53

dealers]. Specifically, defendants sold securities to 

others (e.g., [Siry’s] limited partnership interest) in 

the capacity of a broker-dealer without a license.”

These allegations do not entitle Siry to attorney fees under 

section 1029.8 because Siry has not sufficiently alleged strict 

compliance with the prerequisites necessary for its partnership 

interest to qualify as a “security.” 

To begin, Siry’s conclusory allegation that its “limited 

partnership interest . . . qualifies as a security” is a “‘“conclusion 

of . . . law”’” entitled to no weight whatsoever. (Evans, supra, 38 

Cal.4th at p. 6.) The same is true of its companion allegation that 

the interest qualifies as “an investment contract”—both because 

it is conclusory and because the term “investment contract” is “so 

broad as to give little more guidance than the term ‘security’” 

(Graham, supra, 163 Cal.App.3d at p. 1165, fn. 4).

Although a limited partnership interest can constitute a

“security” “under appropriate circumstances” (Graham, supra, 

163 Cal.App.3d at p. 1166; People v. Simon (1995) 9 Cal.4th 493, 

499), Siry has not alleged that those circumstances exist here

because it has not alleged that its limited partnership interest 

satisfies either the risk-capital or federal tests. 

A limited partnership interest qualifies as a “security” 

under the risk-capital test only if it involves “[(1)] an attempt by 

an issuer to raise funds for a business venture or enterprise; [(2)] 

an indiscriminate offering to the public at large where the 

persons solicited are selected at random; [(3)] a passive position 

on the part of the investor; and [(4)] the conduct of the enterprise 

by the issuer with other people’s money.” (Silver Hills, supra, 55 

Cal.2d at p. 815.) Siry never alleged that it was solicited “at 

random”; to the contrary, Siry submitted declarations indicating 
54

that it was solicited due to the long-time friendship between its 

principal and Farkhondehpour and Neman. 

A limited partnership interest qualifies as a “security” 

under the federal test only if it “involves an investment of money 

in a common enterprise with profits to come solely from the 

efforts of others.” (Howey, supra, 328 U.S. at p. 301.) Although 

the terms of the limited partnership agreement appended to the 

operative complaint indicate that the limited partners were to

have no management or control over the limited partnership and

that the general partner was to have “exclusive control,” Siry 

repeatedly alleges in its operative complaint that these 

contractual limitations were “disregarded” and that

Farkhondehpour and Neman, despite being limited partners, 

“control[led], dominate[d], manage[d] and operate[d]” the limited 

partnership. Because Siry’s allegations that the limited 

partnership agreement was being ignored preclude reliance on 

that agreement in lieu of a well-pled allegation that Siry was 

merely a passive investor, Siry needed to affirmatively plead its 

passivity. But there is no such allegation in Siry’s operative 

complaint, and its absence is fatal.

Siry’s sole remaining contention is that two provisions in 

the limited partnership agreement otherwise suggest that the 

parties’ limited partnership interests were securities. Siry points 

to (1) the general partner’s power to refuse to consent to a limited 

partner’s transfer of its partnership interest “if such transfer 

would constitute a violation of any rule, law, or securities 

regulation,” and (2) the prohibition against a limited partner 

assigning its interest “if, in the opinion of counsel to the 

Partnership, such assignment may not be effectuated without 

registration under the Securities Act of 1933, as amended, or 
55

would result in the violation of . . . federal or state securities 

laws.” Rather than constituting proof that the limited partners 

definitively viewed their interests as securities, these provisions 

reflect uncertainty on that question and a marked desire not to 

engage in transactions that would subject them to securities 

laws—an odd result if the parties already viewed the limited 

partnership interest as a security. 

c. Are the attorney fees awards invalid for other 

reasons?

In light of our conclusion that there is no statutory basis for 

the court’s award of attorney fees, we have no occasion to 

consider defendants’ remaining arguments that the trial court 

also erred in (1) awarding fees for litigation prior to the 

settlement of the initial lawsuit between the parties, (2) 

awarding fees for litigation prior to the filing of the third 

amended complaint when Siry first sought attorney fees in this 

case, or (3) awarding fees when Siry never gave notice of a 

maximum amount of attorney fees.

* * *

Where, as here, “a trial court erroneously award[ed] [one 

type of damages,] a reviewing court may, instead of reversing the 

entire judgment, make an order of modification striking that 

portion relating to [the erroneously awarded] damages and affirm 

the judgment as so modified.” (Crogan v. Metz (1956) 47 Cal.2d 

398, 405; accord, Mega RV Corp. v. HWH Corp. (2014) 225 

Cal.App.4th 1318, 1344; cf. Van Sickle v. Gilbert (2011) 196 

Cal.App.4th 1495, 1521-1522 [“when a judgment is vacated on 

the ground [that] the damages awarded exceeded those pled,” the 

reviewing court ordinarily affirms and modifies the judgment to 

reduce the damages, but may allow the trial court to decide 

whether to vacate the default to allow further amendment].)
56

DISPOSITION

The amended judgment is affirmed as modified. We order 

that the amended judgment be modified to (1) strike the 

$1,912,974 treble damages award in its entirety and substitute in 

its place the $2 million punitive damages award, with 

Farkhondehpour (jointly and severally as an individual and as a 

trustee) and Neman (jointly and severally as an individual and as 

a trustee) severally liable for $1 million each, and (2) strike the 

$4,010,008.97 attorney fees award in its entirety. The parties are 

to bear their own costs on appeal.

CERTIFIED FOR PUBLICATION.

______________________, J.

HOFFSTADT

We concur:

_________________________, P.J.

LUI

_________________________, J.

CHAVEZ