CALIFORNIA ATTORNEY'S FEES

Bankruptcy: Ninth Circuit BAP Issues An Illuminating Opinion On Block Billing And Travel Time Issues

 

Although Germane In Bankruptcy Context, Case May Be Helpful in Non-Bankruptcy Cases.

     You readers of our blog are a constant source of inspiration. Today, we thank attorney Andrew L. Fagan of Santa Rosa for alerting us to a recent unpublished Ninth Circuit BAP decision that has interesting discussions of block billing and reimbursement of attorney travel time.

     To some extent, this next decision is of most interest to debtor/trustee/creditor committee bankruptcy practitioners, who must have their fees evaluated and approved by bankruptcy courts (after complying with stringent U.S. Trustee Office guidelines). However, there are some important nuggets in the case which may have far broader significance in non-bankruptcy contexts.

     In re Shari L. Thomas, BAP No. CC-08-1307-HMoPa (BAP 9^th Cir. Jul. 6, 2009) (not for publication) had this to say on these two issues:

     · A bankruptcy court has discretion to reduce, rather than disallow, compensation based on fee applications where a portion or all of the fees are based on "lumped entries" (aka block billing)—Mendez v. County of San Bernardino, 540 F.2d 1109, 1129 (9^th Cir. 2008) (reduce hours due to block billing, but not make an across-the-board reduction or rejection of all hours); Darling Int'l., Inc. v. Baywood Partners, Inc., 2007 WL 4532233 at * 9 (N.D. Cal. 2007) (as a percentage penalty for lumping, most courts make an adjustment ranging from 5% to 30%, consistent with a California State Bar's committee's finding that block billing may increase time by 10% to 30%);

     · The amount of total "lumped" fees does not dictate the percentage of reduction, with the Thomas appellate panel sustaining 10% reduction as a remedy for lumped entries—see also Gundlach v. N.A.A.C.P., 2005 WL 2012738 at *4 (M.D.Fla. 2005) (30% reduction where all fees based on lumped entries); Spalding Lab., Inc. v. Ariz. Biological Control, Inc., 2008 WL 2227501 at *4 (C.D.Cal. 2008) (15% reduction where all fees based on lumped entries); Ambriz v. Arrow Fin. Serv., LLC, 2008 WL 2095617 at *4 (C.D.Cal. 2008) (20% reduction where attorneys respectively lumped 17% and 9% of time as lumped entries); In re Recycling Indus., Inc., 243 B.R. 396, 407 (Bankr. D.Colo. 2000) (5% reduction when 10% of fees based on lumped billing entries).

     · There is no consensus among courts on what should be allowed for professional's travel time under the bankruptcy compensation statute. Although some districts have general orders and established policies (examples: 50% of ordinary rate applies to travel time up to 100% for lost opportunities, depending on district), bankruptcy courts have wide discretion in this area. A dissenting bankruptcy judge in Thomas disagreed with the majority's full approval of a lawyer's travel time request. See also In re Babcock & Wilson Co., 526 F.3d 824, 828-829 (5^th Cir. 2008) (travel time compensated at 50% of ordinary rate); In re McKeeman, 236 B.R. 667 (BAP 8^th Cir. 1999) (same).

Fifth District Affirms Most Respects Of A FEHA Attorney Fee Remand Proceeding, But Does Not Award Plaintiffs Payment At The Top Permissible Rate For All Hours Claimed By The Attorneys

Court of Appeal Sustains Reductions by Trial Court and Suggests That Fees Expended by the Opposition Has Probative Value in Fee Proceedings.

            In Horsford v. Board of Trustees of California State University (Horsford I), 132 Cal.App.4^th 359, 402 (2005), the Fifth District Court of Appeal determined a trial court had applied the wrong standards in awarding attorney’s fees to prevailing plaintiffs in a California Fair Employment and Housing Act, Government Code section 12900 et seq. (FEHA), action.  (FEHA has a mandatory fee-shifting clause benefiting prevailing plaintiffs.  See Gov. Code, sec. 12965(b).)  It remanded for further proceedings.

            Remand proceedings did take place, but before a different trial judge because the original judge recused himself.  Although normally fee remands are held before the same judge, a substitute judge in posttrial proceedings exercises the same discretion as the original judge.  (See Kershner v. Morgali, 152 Cal.App.2d 884, 885 (1957).) 

            The new judge, Fresno County Superior Court Judge Donald R. Franson, Jr., held several fee motion hearings and a new trial motion hearing, entering a corrected fee award of $3,229,709.50, substantially less than the $10.4 million fee request by the prevailing plaintiffs.  Plaintiffs appealed again.  The Fifth District affirmed most aspects of Judge Franson’s determinations in Horsford v. The Board of Trustees of California State University (Horsford II), Case No. F051782 (5^th Dist. Sept. 4, 2008) (unpublished).

            The Court of Appeal—in a 3-0 decision authored by Acting Presiding Justice Vartabedian—rejected plaintiff’s overarching theme that full fee compensation under FEHA inevitably meant “payment at the top permissible rate for all the hours counsel actually devoted to the case.”  Instead, the appellate panel believed that FEHA compensation focused on “a reasonable rate for hours reasonably spent on the case.”  (Slip Opn., at p. 3, citing Horsford I, supra, 132 Cal.App.4^th at p. 394.)  With these broad principles in mind, the Fifth District proceeded to analyze plaintiffs’ specific challenges.

            Relying on several federal decisions, plaintiffs contended that the trial court could not drastically reduce hours with providing sufficient details.  Wrong, said the Court of Appeal, because California state law is different in not imposing “a similar obligation on the trial court.”  (Slip Opn., at p. 5, citing Maria P. v. Riles, 43 Cal.3d 1281, 1294 (1987).)  However, the appellate panel did acknowledge that greater specificity does aid appellate review of a lower court fee award.  Judge Franson did provide detail for his reductions by enumerating suspect categories and providing reasons for not awarding the requested fees.  Here is how the logic behind the reductions broke down:

• Reductions for approximations made in “reconstructed” time records.  Plaintiffs’ time records for work before Horsford I were not contemporaneous, but reconstructed after the fact.  Although contemporaneous time records are not required as part of the fee substantiation process in a fee petition, the trial court is not required to evaluate “reconstructed” time with the same credibility and presumption of accuracy.  (See PLCM Group, Inc. v. Drexler, 22 Cal.4^th 1084, 1096 n. 4 (2000).)
• Vague time entries.  The trial court can determine that there is no basis to determine whether the time was reasonably spent and, therefore, compensable.
• Incorrect time entries.  Where plaintiffs acknowledged incorrect time entries, the trial court could disregard plaintiffs’ counsel’s post facto attempts to explain away the errors. 

Although verified time statements are entitled to credence, they are not sacrosanct; “it merely means the trial court must examine the records and use them as the basis for its lodestar determination where the records are found accurate and reliable.”  (Slip Opn., at p. 7.)

            That brings us to the one area that Justice Vartabedian found might have to be addressed on remand—block billing, a topic we have addressed many times before.  (See posts of June 20, June 23, and August 13, 2008.)  Boiled down to its essence, the appellate panel was concerned that the trial court might have excluded the entire time that was block billed rather than simply adjusting or reducing the block-billed hours.  Although this decision in nonpublished, the Fifth District appears to be saying that it is an abuse of discretion for a trial court to exclude block-billed time, rather than making adjustments downward—a rule which puts it in accord with the Ninth Circuit on this subject.  (See our August 2, 2008 post on Moreno v. City of Sacramento.)   The Court of Appeal remanded to determine what was done and issued some directives:  (1) if all block-billed time was excluded, then remand proceedings were necessary for the trial court to make adjustments and then award some reasonable additional fees; or (2) if the trial court did make adjustments in the first instance, it should reinstate its previous fee order.

            Plaintiffs next argued that any fee reductions were limited to those claimed by the defense in opposition to any fee request.  This argument was not persuasive to the Fifth District.  Rather, “[w]e find no basis to impose a duty on opposing parties to quantify each objection or to impose on the trial court a limitation on its exercise of discretion based on such quantification.”  (Slip Opn., at p. 9.)  The trial court has the ability to exercise its own judgment about the reasonable necessity of legal services.  (See Ketchum v. Moses, 24 Cal.4^th 1122, 1137-1138 (2001).)  The appellate panel concluded that the trial court can consider broader issues of inefficiency and duplicative effort in arriving at its own reduction to requested fees. 

            Plaintiffs then challenged the trial court’s award of lower hourly rates than counsel requested.  They argued that there was uncontradicted evidence supporting the higher hourly rate claim, meaning that the lower court could not award a different hourly rate, citing Graciano v. Robinson Ford Sales, Inc., 144 Cal.App.4^th 140, 156 (2006) and Hadley v. Krepel, 167 Cal.App.3d 677, 682 (1985).  The Fifth District, although distinguishing the cited cases, acknowledged that these decisions could support such a “proposed rule” but then went on to disagree with the reasoning in these prior cases.  Instead, the trial court has discretion—based on its own experience of rates and findings by the first judge hearing the fee dispute—to decide that different hourly rates are appropriate.  (Slip Opn., at pp. 11-12.)

            Because the 1.5 multiplier determination was not arbitrary, the appellate panel next addressed plaintiffs’ contention that interest on the fee award should have run as follows:  (1) from the original judgment date as far as counsel’s trial-phase fees, and (2) from the date of Horsford I as far as appellate phase fees.  Not so, Justice Vartabedian found on behalf of the Fifth District panel.  Because the fee award was its own several judgment for appeal purposes, the prior reversal in Horsford I was just that—not a simple modification of judgment—such that interest runs from the date of the new judgment.  (See Stockton Theatres, Inc. v. Palermo, 55 Cal.2d 439, 446 (1961).)  Plaintiffs’ interest claims were properly rejected by the trial court.

            As we explored in our June 8, 2008 post and recent post on the Sixth District’s unpublished Reyes decision, there is a divergence in judicial opinion as to whether an opponent’s fees are relevant in supporting the reasonableness of a claimant’s fee request.  The Fifth District appears to suggest that at least one panel believes this type of proof is probative.  In footnote 6 of Horsford II, the appellate panel stated:

            “Given the magnitude of the present case,

              the court might find it useful

              to require respondents [the defense] to submit a billing

              summary for discovery, trial preparation, trial, and the first

              appeal, redacted so the summary would not

              disclose privileged information.  While the hours

              and hourly rates of opposing counsel would not be

              dispositive of plaintiffs’ fee claims,

              such information could well help place plaintiffs’

              claims in some perspective.  (See Maughan v. Google

              Technology, Inc.(2006) 143 Cal.App.4^th 1242, 1251.)

              At the hearing in this case, Judge Franson posed

              the question whether respondent’s failure

              to disclose this information,

              in itself, supported an inference that plaintiffs’ original fee

              claim was not unduly high.  The parties did not answer that question nor

              raise it on appeal.  We do not decide the matter; we merely point out the

              possible usefulness of opposing party’s legal bills in evaluating the

              number of hours plaintiffs’ counsel say was reasonably required to

              litigate this case.  (See generally Pearl, Cal. Attorney Fee Awards

              (Cont.Ed.Bar, 2d ed. 2007 Supp.) sec. 14.36, pp. 444.1-444.2.)”

            BLOG OBSERVATION #1—Richard M. Pearl, author of the CEB treatise on California Attorney Fees Award, was one of the counsel for plaintiffs in Horsford II.

            BLOG OBSERVATION #2—Judge Franson attended the same high school in Fresno as blog contributor Mike Hensley.  His father was a former justice on the Fifth District, and was a superb jurist.  Judge Franson, while a private practitioner, was adverse to Mike in a matter that resulted in a published decision. (See All-West Design, Inc. v. Boozer, 183 Cal.App.3d 1212 (1986) [among other holdings, trial court could credit contingency arrangement and estimate of attorneys hours spent—rather than detailed time records—in awarding a fee to prevailing plaintiff].)  Judge Franson won most aspects of that case, but it was a hard fought battle.  Greetings to you and hope you are enjoying your experience on the bench. 

            

            

            

Ninth Circuit Reverses Zero Section 1988 Civil Rights Fee Award Where Plaintiff Recovered On Some Theories Against Some Defendants

Federal Court of Appeals Neither Adopts a “Shocks the Conscience” Test Nor Endorses a “Block Billing Entries Denial” Fee Recovery Standard in Civil Rights Cases.

            In Mendez v. County of San Bernardino, Case Nos. 05-56118, 06-56424, & 07-56029 (9^th Cir. Aug. 27, 2008), Mendez and family members prevailed upon and lost some aspects of a civil rights lawsuit arising from the aftermath of an officer-involved shooting that killed Mendez’s deaf-mute son Ignacio in July 2002.  The shooting itself was not challenged, but the aftermath—an alleged false arrest and illegal search of the Mendez home in the wake of the shooting.  After some claims were dismissed or thrown out on summary judgment, a jury returned with a verdict awarding Mendez $1 each in nominal damages on the false arrest/illegal search claims plus $250,000 in punitive damages against an interrogating police officer.  (Later, the district court reduced the punitive damages to $5,000, a remittur affirmed by the Ninth Circuit.)  Because 42 U.S.C. sec. 1988 authorizes the district court to award reasonable attorney’s fees to a prevailing party in a civil rights action, Mendez moved for such an award.  The district court acknowledged Mendez was a prevailing party but denied her request outright on the basis that it was “so excessive that [it] warrant[s] a denial of fees altogether.”  Mendez appealed the fee denial, a challenge that the Ninth Circuit found meritorious upon review.

            Mendez moved for $727,558 in fees based on 2,570 hours of work, attaching substantial documentation in which partner/associates/paralegals’ hourly rates ranged from $250-550, in which partner/associates agreed to discount hours by 10% for any duplication, and in which paralegals agreed to a 20% hour cut for duplication.  County’s opposition contended the hours should only be 1,999, partner/associates’ hourly rates should range from $150-300, and $97,556 was a fair fee (taking $390,225 as the lodestar and reducing it 75% based on plaintiffs’ limited success).  In reply, Mendez’s attorneys agreed to cut some more hours, but then added in some additional hours for fee petition preparation--presenting a final claim of $727,308 in fees (as well as $65,000 in costs).

            The district court expressed horror at what he believed to be an excessive request, denying the fee/costs requests altogether. 

            In overturning the denials, the Ninth Circuit—in a 3-0 opinion authored by Circuit Judge Fisher—rejected the notion that “special circumstances” existed to deny fees outright.  After noting that the Ninth Circuit had never denied a section 1988 request solely because it “shocked the conscience,” it found that the decisions doing so involved very different facts such as slam dunk merits litigation justifying meager fees or a $750 hourly rate request by a one year experienced solo practitioner.  Rather than an outright denial, the preferable route was for the district judge to reduce an award to a plaintiff who achieved only partial or limited success. 

            The district court had also justified denial based on block billing by Mendez’s counsel, a topic we have discussed in the past.  (See our June 20 & 23, 2008 posts and August 13, 2008 post on Christian Research Inst. opinion.)  However, based on Chief Judge Kozinski’s recent Moreno opinion (discussed in our August 2, 2008 post), the federal appeals panel found that, generally speaking, “the use of block billing does not justify an across-the-board rejection or rejection of all hours.” 

            For guidance on remand, the Ninth Circuit directed the district court to determine the lodestar, using the 12 factors set forth in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9^th Cir. 1975).  From that, adjustments could then be made for such considerations as a reasonable hourly rate, unnecessary duplication (rather than just duplication), and the extent of Mendez’s success.  The fee denial was vacated for a new determination by the district court. 

            

            

Winning Anti-SLAPP Defendant Receives Less Than 10% Of Requested Fees

Fourth District, Division Three Affirm Lower Court Determination That Requested Fees Were Excessive--Involving Overstaffing, Vague Block Billing, and Billing for Anti-SLAPP Motion Tasks.

            Prevailing defendants in anti-SLAPP proceedings are entitled to attorney's fees and costs.  Code Civ. Proc., § 425.16(c).  However, the prevailing defendant can only recover for anti-SLAPP activities, not work related to the entire litigation.  (SeeS.B. Properties v. Berti, 39 Cal.4^th 374, 381 (2006).)  Equally important, the prevailing defendant seeking reimbursement of fees and costs bears the burden of proving fee entitlement and the reasonableness of the amount of fees to be awarded.  (ComputerXpress, Inc. v. Jackson, 93 Cal.App.4^th 993, 1020 (2001).) 

            All of these principles came into play in the next case, which also restressed some important lessons--avoid blockbilled time entries and avoid overstaffing of cases.

            In Christian Research Institute v. Alnor, Case No. G039424 (4^th Dist., Div. 3 Aug. 13, 2008) (certified for publication), prevailing defendant on an anti-SLAPP motion moved to recover from plaintiffs over $250,000 in attorney's fees, broken down as 638.6 hours of work on the anti-SLAPP motion (228.7 of the total hours) and a prior appeal of the motion which was affirmed in defendant's favor (about 410 hours).  The trial court did not buy the request, awarding instead $21,300 in attorney's fees and $1,494.83 in costs.  This broke down to compensation for 25 hours on the anti-SLAPP motion, 40 hours on the appeal, and 6 hours for the subsequent fee motion.  The trial court found that the 600-plus hours were excessive, the case was overstaffed with five attorneys, the anti-SLAPP motion was not particularly complex (with plaintiff conceding the public interest prong of the analysis), much of the work done by different lawyers was duplicative and unnecessary, blockbilled entries obscured the nature of some work claimed, and much of the work was related to preparing the case for trial than for anti-SLAPP activities.    Defendant appealed, with the lower court's determination affirmed on appeal, with plaintiffs winning costs on appeal.

            Justice Aronson, writing for a 3-0 panel of the Fourth District, Division Three, found no abuse of discretion under the deferential review standard.  (See Ketchum v. Moses, 24 Cal.4^th 1122, 1132 (2001) [one of our Leading Cases]; Maughan v. Google Technology, Inc., 143 Cal.App.4^th 1242, 1249 (2006).) 

            Initially, the appellate panel found that the trial court correctly applied the lodestar method, compensating defendant at a reasonable $300 hourly rate.  The real focus of the appeal was on the reasonableness of the work effort for which compensation was sought.

            Our local Santa Ana-based court concluded there was no abuse of discretion in drastically reducing the 600-plus hour fee request.  These points resonated as important in reaching this conclusion:

·       Defendant improperly sought to transfer to opposing parties the costs of every minute counsel expended on the case, whether or not anti-SLAPP work was involved ("Counsel's willingness to flout the statutory restriction on the scope of anti-SLAPP fee claims justified the trial court in taking a jaundiced view of the fee request," Slip Opn. at p. 11);

·       Defendant compounded the unauthorized reimbursement requests with vague block billing entries, with 20 "further handling" entries and one-third of the entries not involving anti-SLAPP work ("Blockbilling, while not objectionable per se in our view, exacerbated the vagueness of counsel's fee request, a risky choice since the burden of proving entitlement to fees rests on the moving party," Slip Opn. at p. 11, and "An attorney's chief asset in submitting a fee request is his or her credibility, and where vague, blockbilled time entries inflated with noncompensable hours destroy an attorney's credibility with the trial court, we have no power on appeal to restore it," Slip Opn. at pp. 11-12);

·       Defendant's anti-SLAPP motion did not require intensive discovery or paperwork, the issues were mainly hornbook in nature, and the one novel issue on appeal was resolved by the appellate court without the aid of defendant (Slip Opn., at pp. 12-15); and

·       The case was overstaffed ("Indeed, the five attorneys [defendant] deployed on the motion appear to have expended more time telephoning, conferencing, and e-mailing each other than on identifiable legal research for the motion, supporting the trial court's conclusion the matter was overstaffed," Slip Opn. at p. 13).

Defendant argued that the trial court only had discretion to reduce individualized improper billing entries.  This contention was easily dispatched with this observation:  "…counsel may not submit a plethora of noncompensable, vague, blockbilled attorney time entries and expect particularized, individual deletions as the only consequence.  The trial court could reasonably conclude counsel made no effort to prune the fee request to comply with the law.  Counsel erred grievously by attempting to transfer that responsibility onto the trial court.  The trial court could reasonably conclude counsel's disregard for the law undercut the credibility of their fee request and, as officers of the court, warranted a severe reaction," Slip Opn. at p. 16—namely, a wholesale reduction of a substantial nature to the amount of fees requested. 

            BLOG UNDERVIEW--This case reinforces many of the lessons stressed by the speakers at the June 19, 2008 NALFA conference in Los Angeles, summarized in our June 20, 2008 post.  Alnor's reasoning on overstaffing and blockbilling parrots the advice coming from the panelists at the NALFA conference to avoid these two pitfalls. The decision also underscores a crucial truth:  a fee claimant's credibility may be the most important factor in the equation, meaning a fee petition must be honest in requesting a fee that is reasonable for the efforts actually achieved.  Once this credibility is lost, a drastically small fee award or no fee award may be the end result. 

            

            

Fee Motion Substantiation--Do You Need to Attach Detailed Fee Billings That Reveal Attorney Client Information?

Fourth District, Division One Answers “No” and Provide Adequate Substantiation Tips in Pair of Unpublished Decisions.

            Numerous times, we have been asked and have visited the question of whether detailed fee billing statements, which may divulge attorney-client privileged information, need to be attached as exhibits to a fee motion.  The next two cases establish that such statements do not need to be produced or can be selectively redacted, as long as there is other evidence that adequate describes the services rendered or from which claims apportionment can be reviewed by the trial court.

            In Gregg v. Revelle (Gregg I), 2004 WL 2601780 (4^th Dist., Div. 1 Nov. 17, 2004) (unpublished), a trial court awarded cross-defendant Revelle $446,507.50 in attorney’s fees after he won a summary judgment against Gregg’s cross-complaint in a dispute with a contractual fees clause.  Revelle supported his fee motion with an attorney declaration making estimates of the appropriate time spent on matters related to the cross-complaint and with “summary pages from monthly billings.”  Detailed invoice information was not included for fear that the attorney-client privilege would be waived for many entries.  Gregg argued that the summaries were too incomplete to provide meaningful review of the fee request.  Revelle then supplemented with “heavily redacted” copies of billing statements, sometimes saying little more than “research,” “review,” or “telephone conference.”  At the fee motion argument, the trial court tried to broker a non-waiver stipulation on the privilege concern, but the parties were ultimately unable to come to an agreement.  Nevertheless, substantial fees subsequently were awarded.

            On appeal, the Fourth District panel reversed the $445,507.50 fee award as based upon records “too fragmented and incomplete” for the lower court to properly exercise its discretion in awarding fees.  (Id.at *5.) 

            At the outset, the appellate court observed that fees may be awarded in the absence of detailed time sheets, such as in contingent fee matters where apportionment is not required.  (See, e.g., Sommers v. Erb, 2 Cal.App.4^th 1644, 1651-1652 (1992).)  On the other hand, other circumstances—especially where there is a need to apportion between fee-allowing claims and non-fee claims—require more substantiation than a generalized attorney declaration.  (See, e.g., Bell v. Vista Unified School Dist., 82 Cal.App.4^th 672, 689 (2000), also reviewed on our June 23, 2008 post on the issue of block billing practices.)  The Court of Appeal then provided these useful “rules of thumb”:

·       “Sommers, as well as the other cases which do not require actual billing records, make it plain that a general description of tasks performed, which does not disclose any privileged attorney-client communications or attorney work product, is sufficient to support an award of attorney fees.  Given the entirely ancillary nature of an attorney fees proceeding and the unique role and ability of the trial judge who presided over the underlying litigation, we see little justification for any intrusion into the otherwise privileged matters.”  (Id.at *4.)

·       In apportionment-type fee proceedings, “[s]ome description of the pleading, discovery, motion, or portion of trial preparation, to which any of the billed tasks was related is needed so that the trial court can determine whether the hours spent on a particular task were reasonable and importantly whether they were related to the cross-complaint rather than the other portions of the complex litigation.  Such a description can be provided without disclosing any attorney-client communications or attorney work-product.”  (Ibid.)

Revelle then brought a renewed motion for fees after the Gregg I reversal.  He was again successful, garnering $473,832.50 in attorney’s fees and $1,926.70 in costs.  Gregg was unhappy again, appealing, but losing this time in Gregg v. Revelle (Gregg II), 2006 WL 2821505 (4^th Dist., Div. 1 Oct. 4, 2006) (unpublished).   After rejecting the jurisdictional challenge that the prior reversal barred a remand, especially because “[t]he exact type, amount and spirit of evidence necessary to support a particular fee award is not a clearly settled matter” and varies greatly “[d]epending on the type of case and the fees issues raised,” this time the fee award was sustained on appeal.

In the renewed fees motion, Revelle brought in new counsel who cured the prior infirmities.  New counsel obtained the billing records and redacted only time entries “clearly revealing attorney-client communications” from the records submitted to the trial court.  New counsel also provided an attorney declaration apportioning out non-fee claim work and explaining that only one-sixth of the total time related to non-fee claim work.  Both the trial and appellate courts found this newly-reformatted information adequate.  The Court of Appeal summarized its ultimate conclusion this way:  “The documentation submitted with Revelle’s renewed motion for attorney fees is more revealing.  The records state the date work was done, the initials of the professional who did the work and give a description of the work.  In some cases that description refers specifically to work done with regard to Gregg’s cross-complaint.  In some cases no such reference is made.  Nonetheless, a trial judge aware of the dates on which various events occurred in the [relevant] matters could, with the aid of the billing records submitted, make a reasonable judgment concerning the apportionment of time on the cases claimed by Revelle.”  (Id. at *9.)

BLOG SUMMARY NOTES—The two Gregg cases are helpful in distilling some generalized substantiation rules for fee motions.  First, claimants should submit detailed billing records, redacting out only selective, critically privileged information but then providing a explanatory annotation of the work performed that still shows what was done.  Second, attorney declarations and charts should be submitted in apportionment situations so that the trial judge does not have to undertake the laborious task or simply make wholesale reductions of a significant sum.  Third, we would suggest practitioners think ahead in their billing entries to avoid entry of sensitive client discussions (very seldom is it necessary to make entries of this nature).  Fourth, we believe all substantiation submitted to the trial judge should also be given to the party opposing the fee application; an offer of allowing in camera review to the trial judge has due process problems—denying an opponent the opportunity to examine the materials being relied on by the lower court in exercising its discretion.  Our suggestions are general in nature and not tailored to specific situations, which means practitioners need to use judgment in submission of fee substantiation in each particular case.  As Gregg I itself suggests for an example, detailed billings records may not be necessary in a contingency matter where apportionment is not an issue.  Nevertheless, we generally have found that trial judges still appreciate having detailed, selectively-redacted billings to review—they provide comfort in scrutiny and increase the credibility of the fee proponent who is willing to share this level of detail.

Block Billing: Commentators Disapprove the Practice and Courts Have Wide Discretion in Disregarding Block Billed Entries Altogether or Reducing by a Reasonable Percentage

State Courts Have Wide Discretion, While Federal Courts Usually Reduce By a Trial Court-Assigned Percentage.

            Block billing is the practice of assigning a one-time charge to multiple tasks.  An example looks like this:  “June 10, 2008:  Telephone conferences with client, retained expert, and opposing counsel; legal research; meeting with expert and associate—4.00 hours.”  As we show below, respected commentators, ethics experts, and JAMS panelists uniformly condemn the practice.  Just as important, courts retain extreme discretion to disregard the block entries altogether or reduce the entries by reasonable percentages.  Some sample state court (and, as an added bonus, some federal court) decisions are surveyed in this post.

            In an article written by M. Leigh, M. Schroeder, and D. Wolf in the November 1997 issue of “U.S. Business Litigation,” the authors opined that block billing is “almost universally disapproved.”  Gerald F. Phillips, a Los Angeles-based mediator, arbitrator, and billing expert (also, one of the speakers at the June 19 NALFA seminar summarized in our June 20, 2008 post), explains that the practice “is disapproved because it allows a lawyer to conceal the time spent on each task and prevents the determination of whether individual tasks were performed within a reasonable time.”  (See Phillips, “Reviewing A Law Firm’s Billing Practices,” The Professional Lawyer, Fall 2001, p. 11-12.)  Mr. Phillips is not alone in his sentiments. Alexander S. Polsky, a neutral at JAMS (based out of the Orange, CA office), has echoed Mr. Phillips’s concerns as well as opined it violates statutory billing mandates to be obeyed by lawyers:  “This type of activity clearly violates [Business and Professions] Code section 6148’s requirement that all bills rendered to a client shall clearly state the basis thereof.  The principal is unable to review the method of determination of attorney’s fees and costs as required by the code.”  (Polsky, Internet article entitled “The Rules Governing Fee Agreements, Statements and Disputes.”)

            This brings us to how California state courts deal with block billing.  The basic rule is that courts have wide discretion to assign a reasonable percentage to the block billed entries, disregard them altogether, or determine that other evidence is sufficient to substantiate the hours aside from the block billing entries.

·       Bell v. Vista Unified School Dist., 82 Cal.App.4^th 672, 689 (2001), the seminal case on the block billing subject, supports the proposition “the trial court should exercise its discretion in assigning a reasonable percentage to the entries, or simply cast them aside” if counsel “cannot further define his billing entries ….” 

·       The Fourth District, Division One (the same court deciding Bell) ruled in the unpublished decision of AntiCancer, Inc. v. Novartis Corp., 2006 WL 147530 at *5-6 (4^th Dist., Div. 1 Jan. 20, 2006) (unpublished) that, in the context of awarding fees to a successful SLAPP defendant, “[w]e decline to categorically condemn the use of block billing.”  However, the appellate court did give stern warning to practitioners adopting this billing practice that they may be unhappy with a resultant fee award:  if block billing entries are used, counsel “places itself at risk of receiving a substantially reduced recovery or no recovery at all based on an unjustified or unsupported request.”  (Id. at *5.)  The AntiCancer court did quote Bell, sustaining a trial court’s 37% reduction due to block billing and apportionment issues (with the trial court indicating it gave the claimant the benefit of the doubt on most block billing entries,  but still made some appropriate reductions). 

·       Godinez v. Schwarzenegger, Case No. B161508 (2d Dist., Div. 3 Aug. 25, 2005) (partially certified for publication; unpublished on block billing issue) rejected a block billing challenge because the reviewing court determined that the testimony of the attorney about the number of hours worked, even without detailed records, can be accepted as adequate substantiation. 

The state courts, if they want, can also borrow the federal approach, which seems to boil down to permitting the district court to reduce the block billed by a reasonable specified percentage amount.  Three quick examples illustrate this approach, plus we review a Ninth Circuit decision reversing a percentage reduction as too excessive.

            In In re Samuel R. Pierce, Jr., 190 F.3d 586, 593-594 (D.C.Cir. 1999), the D.C. Circuit confirmed that its general practice was to reduce vaguely entered hours of plaintiffs’ attorneys by 10%.  Similarly, the Eighth Circuit in H.J. Inc. v. Flygt Corp,, 925 F.2d 257, 260 (8^th Cir. 1991) upheld a district court’s reduction of hours billed by the prevailing plaintiff’s attorney by 20% for vague billing entries. Finally, in Gratz v. Bollinger, 353 F.Supp.2d 929, 939 (E.D. Mich. 2005), District Judge Duggan reduced requested fees 10% due to block billing and vague entries. 

            A contrasting situation, although consistent from a methodology standpoint, was presented in Welch v. Metropolitan Life Ins. Co., 480 F.3d 942 (9^th Cir. 2007).  There, the firm of Kantor & Kantor (Mike Hensley worked with Lisa Kantor when she was an associate at Kadison Pfaelzer in Los Angeles) prevailed in a federal ERISA fee-shifting context for plaintiffs and sought $39,112 in fees.  The district judge awarded only $10,762, reducing the lodestar hourly rate and applying a 20% across-the-board reduction on all entries for block billing.  On appeal, the Ninth Circuit reversed.  In so doing, the Ninth Circuit found that the 20% reduction was too excessive because only about 50% of the time entries were block billed—resulting in an effective 40% reduction by applying the 20% across-the-board reduction to all billed hours.  The Court of Appeals remanded for a recalculation, as well as reversed the hourly rate reduction.  (There also is an excellent discussion of the types of proof that will suffice to bolster the lodestar hourly rate being claimed.)

            It seems prudent to say that block billing should be avoided.  Courts can disregard block entries altogether or apply reductions that the winning plaintiff’s attorney will not like and cannot predict. Aside from that, block billing may well violate attorney statutory billing requirements and ethical prohibitions against billing “unconscionable fees.”  The small amount of time necessary to bill each task separately is a small sacrifice to be made in order to avoid the “block billing vortex.”

REDEVELOPMENT AGENCY OF POMONA AWARDED OVER $4 MILLION IN FEES IN SUCCESSFUL DEFENSE OF WRONGFUL FORECLOSURE SUIT AND IN SUCCESSFUL PROSECUTION OF FRAUD/CONTRACT CROSS-CLAIMS

Second District Affirms Lower Court Award, Rebuffing Apportionment, Inadequate Fee Substantiation, and Reasonableness Challenges.

            Redevelopment Agency of the City of Pomona (RA) foreclosed on a $9.3 million loan made to plaintiffs for purposes of developing a retail commercial center.  Plaintiffs pursued contract and wrongful foreclosure  claims against RA, which primarily defended based on an unclean hands defense.  RA also brought cross-claims against plaintiffs for breach of contract and fraud.  RA eventually won even though there was a reversal of some interim summary judgment/adjudication rulings adverse to plaintiffs.  After a bench trial, the trial judge ultimately determined that the main plaintiff failed to pay over $1 million in delinquent taxes, which breached trust deed obligations to RA and also constituted unclean hands of a nature to bar equitable relief.

            Now to the salient part of the case for this post.  There was a note and owners participation agreement with fees clauses.  The trial judge awarded RA $4,126,638.98 in attorney’s fees.  Main plaintiff lost her appeal on the merits, but also appealed the fee award.  She also lost that appeal, also.

            In Kline v. Redevelopment Agency of the City of Pomona, Case No. B184453 (2d Dist., Div. 7 June 17, 2008) (unpublished), the Second District rejected apportionment, inadequate fee substantiation, and reasonableness challenges by the appealing main plaintiff. 

            Citing Webber v. Inland Empire Investments, Inc., 74 Cal.App.4^th 884, 919 (1999), the Second District panel determined apportionment did not need to be done because the fees involved representation on an issue common to both the complaint and cross-complaint.  Because the entire case centered on the wrongful foreclosure claim, the trial judge correctly found that the operative cross-claim facts were the same ones that related to RA’s unclean hands defense to plaintiff’s complaint.  No apportionment necessary, the appellate court determined.

            RA had attached declarations and extensive details of the hours spent on the litigation in support of its fee motion.  Not only that, but RA did a very smart move—it only asked to recoup a “blended” hourly rate (billing attorneys at a lower rate and other personnel at a higher rate, but using the same hourly rate in the end).  The Second District found that the trial judge easily could find that this substantiation and hourly rate position were reasonable in natue.

            As to overall reasonableness, the Court of Appeal stated the trial judge did use discretion in lowering the fee request by $150,000 on the basis that RA did not need to have two to three attorneys present throughout the trial.  (Slip Opn., at pp. 30-31.)

            So, in the end, marathon litigation cost a plaintiff over $ 4 million, with a trial judge reducing RA’s fee request by a little under 4%--after plaintiff had lost her wrongful foreclosure claim.  This catastrophic result illustrates how cases can end when there is a fees clause that reallocates risk between the contracting parties. 

In PRO PER APPELLANT LOSES CHALLENGES TO APPELLATE ATTORNEY FEE AWARD FOR BRINGING A FRIVOLOUS APPEAL OF AN ANTI-SLAPP ORDER

Fourth District, Division 3 Sanctions Losing In Pro Per Plaintiff By Affirming $40,000 Attorney’s Fees Award.

            Previously, an in pro per litigant filed an anti-SLAPP motion to strike a fraudulent transfer complaint by an opponent.  (See Code Civ. Proc., §425.16 [anti-SLAPP statute].) 

In pro per lost the motion, and the trial court imposed sanctions against him.  The appellate court affirmed and imposed further sections against in pro per for bringing a frivolous appeal instituted solely for delay (Code Civ. Proc., §425.16(c); Cal. Rules of Court, rule 8.276(a)(1)).  The trial court awarded respondent about $40,000 in appellate fees, a reduction of $13,000 in the $53,000 of fees/costs actually sought.  In pro per appealed again, even though respondent’s Orange County attorneys only sought recovery for fees at a blended rate of $225 per hour.

            Justice Ikola, writing for a 3-0 Fourth District, Division 3 panel, affirmed once again in Palacio Del Mar Homeowners Assn., Inc. v. McMahon, Case No. G038622 (4^th Dist., Div. 3 May 23, 2008) (unpublished).

            The appellate court started its discussion by noting that section 425.16 uses the lodestar adjustment method for determining the proper amount of fee awards, namely, an assessment of hours spent by the attorneys.  The appellate court found nothing wrong with the 175 hours at $225 per hour spent on the appeal, because “the case was not exactly [a] cakewalk” even though “the billing on the underlying appeal was not exactly a model of efficiency.”  The Court of Appeal, although seeing some merit to each side about the amount of fees expended by respondent, also observed that the trial court had discounted 50 hours such that there was no abuse of discretion in the ultimate fee award.

            The appellate panel found that the $225 per hour attorney rate was reasonable, although providing valuable guidance on how reasonableness should be proven on this issue.  Respondent only provided a declaration from its own counsel attesting to reasonableness of rates charged.  The Court of Appeal did state “[a]s [appellant in pro per] notes, the better practice for showing the reasonableness of the lawyers’ billing rates would have been for [respondent] to offer evidence of other lawyers’ rates.”  (Slip Opn., at p. 5, citing Ketchum v. Moses, 24 Cal.4^th 1122, 1128 (2001).)  However, the appellate court went on to observe that respondent was not required to do this, especially given that in pro per did not present any evidence of lower rates. 

            In pro per also suggested that he was wrongfully denied discovery regarding lawyers’ billing rates, but this contention was rejected because he inadequately raised the argument below.  (POSTS TO COME—We will discuss whether litigants in fee contests can take discovery and what forms of discovery are appropriate.)

UNSUPPORTED CHALLENGE OF “EXCESSIVENESS” OR “DUPLICATIVE WORK” BY APPELLANT CHALLENGING FEE AWARDS REJECTED BY COURT OF APPEAL

Second District Affirms Award of Anti-SLAPP Fees to Defendant Where Fee Attacks Were Not Supported by Competent Evidence.

            

            When opposing a fee motion, a litigant should support challenges with competent evidence.  Such evidence can take the form of an expert witness or a particularized challenge to specific line entries (example of the second type of evidence—showing fees were spent on noncompensable claims and should be apportioned because there was no overlap with compensable claims).  A recent decision from the Second District, Premier Medical Mgt. Sys., Inc. v. Cal. Ins. Guar. Assn., Case No. B195889 (2d Dist., Div. 4 May 30, 2008) (fee award discussion not published), fully supports what we have just recommended.

            There, a trial judge awarded substantial attorney’s fees to three defendants on remand from a prior appellate opinion where the Second District reversed a trial court order denying an anti-SLAPP motion.  Both in the trial court and on appeal, plaintiffs argued that the fees were excessive, duplicative, and improperly included compensation for matter unrelated to the anti-SLAPP motion.  The Court of Appeal found no abuse of discretion in the fee awards “on the record presented.”  (Slip Opn., at p. 2.)

            Fairly early on in the decision, Presiding Justice Epstein—writing for the 3-0 unanimous panel—observed that the appellants failed to file any declaration in their fee opposition papers, provided no evidence to contradict the attorney declarations of the moving parties, and provided no evidentiary challenge to the fees claimed.  (Slip Opn., at p. 10.)  This was a bad omen of things to come.

            Initially, appellant tried to convince the panel to adopt a 50-hour figure used by another division of the same court in Maughan v. Google Technology, Inc., 143 Cal.App.4^th 1242, 1249 (2006), a figure adopted in that case as the reasonable limit for hours allowed on an anti-SLAPP motion.  No way, Justice Epstein wrote, reasoning:

“A broad rule adopting a 50-hour limit would be contrary to [the] case-by-case approach [mandated by Ketchum v. Moses, 24 Cal.4^th 1122 (2001), discussed in our post of U.S. Western Falun Dafa Assn.].  It also would conflict with application of the deferential abuse of discretion standard we apply on appeal.  A limitation such as that suggested by appellants would deprive the trial court of the full range of discretion envisioned by the Ketchum court.”  (Slip Opn., at p. 12.)

            Then, the appellate court turned to the fee reasonableness challenges, finding appellants presented no evidence to refute the attorney declaration about division of labor, time spent on activities, and reasonableness of overall hours.  The Second District found that unsubstantiated argument could not carry the day for the challenging parties on appeal:  “Appellants had two options to oppose [the attorney fee moving submissions]:  attack the itemized billings with evidence that the fees claimed were not appropriate, or obtain the declaration of an attorney with expertise in the procedural and substantive law to demonstrate that the fees claimed were unreasonable.  They did neither … General arguments that fees claimed are excessive, duplicative, or unrelated do not suffice.”  (Slip Opn., at pp. 15-16; accord, Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist., 106 Cal.App.4^th 1219, 1248 (2003); Braun v. Chronicle Publishing Co., 52 Cal.App.4^th 1036, 1052-1053 (1997).)

            The end result in this opinion buttresses what we suggest in the introductory paragraph—provide evidentiary support to your fee oppositions to stand any meaningful chance of gaining acceptance at either the trial or appellate stage of the proceedings.

DETAILED BILLING STATEMENTS ARE NOT AN ABSOLUTE REQUIREMENT IN FEE MOTION REQUESTS—BUT ARE HIGHLY ADVISABLE

DETAILED BILLING STATEMENTS ARE NOT AN ABSOLUTE REQUIREMENT IN FEE MOTION REQUESTS—BUT ARE HIGHLY ADVISABLE

Third District Affirms Fee Award Based on Detailed Attorney Declaration, Holding Line Item Billing Statement Are Not An Absolute Requirement.

            In Steiner v. Thexton, Case No. C054605 (3d Dist. May 28, 2008) (unpublished), the Third District reviewed a trial judge’s award of $85,279 in fees out of $104,683 sought in the fee motion.  Although the requesting attorney included a detailed declaration describing services performed by himself and his assistant, the attorney did not include line item billing statements.  Instead, he offered to produce them for in camera review in order to safeguard privileged entries in the billings.  The trial judge found that it was not necessary for billing statements to support the fee request, because the attorney declaration was sufficiently detailed to show the extent and quality of services rendered to the prevailing party.  The opponent appealed.

            The Third District affirmed, finding no abuse of discretion when reviewing the fee ruling by the trial judge.

            The appellate court rejected the argument that time records or billing statements had to be provided for trial judge review as a prerequisite to a fee award, citing Weber v. Langholz, 39 Cal.App.4^th 1578, 1587 (1995).  Rather, in this particular situation, the attorney declaration describing services was particularized enough to provide a foundation for the lower court’s review of the fee request.  The Third District did not accept appellant’s argument that Weber was distinguishable because it involved a smaller fee request of only $18,075.  It observed:   “That this case involves more money does not support reversal.”  (Slip Opn., at p. 34.) 

            The loser was liable for the winner’s $85,279 in fees, plus was awarded costs on appeal (which can include fees expended on appeal to win, if timely requested by the respondent).

            PRACTICE POINTER—California Rules of Court, rule 3.1702(c) contains the timing deadlines to file a motion for recovery of attorney’s fees on appeal.  Rule 3.1702(c) indicates such a motion, absent a stipulation or trial court otherwise, “must be served and filed within the time for serving and filing the memorandum of costs under rule 8.276(d).”  The problem with this is that rule 8.276(d) refers to the time to oppose a motion for sanctions, a completely different issue.  We believe that rule 3.1702(c) meant to reference rule 8.278(c), which establishes that a party has 40 days after notice of remittitur to file a motion for attorney’s fees on appeal.  Although not picking up on this typographical error, at least one treatise agrees that the 40 day deadline applies, and correctly amplifies that it is not extended 5 days for mailing of the remittitur notice.See California Civil Appellate Practice, “Costs, Attorney Fees, and Sanctions,” vol. 2, § 20.18, p. 1040 (Cal.Cont.Ed.Bar 3d ed. 2007). We hope the Judicial Council corrects the error in section 3.1702(c).