CALIFORNIA ATTORNEY'S FEES

Indemnity And Apportionment: $402,596.40 Fee Award Affirmed In Refusal To Defend Dispute

Sixth District Found Opposing Party Forfeited Challenge to Billing Record Objections When It Failed to Attack Omissions Through Discovery Motion.

     In the next case, the Sixth District—in UDC-Universal Development, L.P. v. CH2M Hill, Case No. H033862 (6^th Dist. Jan. 22, 2010) (unpublished)—affirmed a $402,596.40 fee award under a contractual provision when sustaining a trial court’s ruling that a cross-complainant obtained more relief by obtaining a judgment for breach of the contractual duty to defend even though cross-complainant lost on its indemnification claims.

     This decision does show the considerable discretion vested in lower courts to determine the “prevailing party” when neither side achieves a complete victory. It will not be disturbed in the absence of a clear abuse of discretion, something that did not happen in this particular case.(Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4^th 858, 894 (2008).)

     However, there is also an important discovery lesson that can be derived from this unpublished decision. Appellant challenged the lower court’s failure to apportion the fees, but made a critical error in proceedings below: it failed to move to compel further responses when it did not receive certain requested billing records from the fee claimant. Both the lower and appellate courts found that this forfeited any challenges that were targeted against the billing records. So, make your discovery motions if you are the fee objector attacking any of the claimant’s billing records.

Discovery Sanctions: $76,906.80 In Fees And Forensic Expert Expenses Awarded Jointly Against Ex-Employee And New Employer In Laptop Spoliation Case

Delaware Decision Shows How Substantial E-Discovery Monetary Sanctions Can Be Imposed In Failure to Preserve Evidence Case.

     Because California just recently passed e-discovery statutes, we continue to monitor cases of interest in fee and expense awards in computer spoliation cases. Here is one out of Delaware.

     In Beard Research, Inc. v. Kates (Kates II), 2009 Del. Ch. LEXIS 170 (Del. Ch. Oct. 1, 2009), an ex-employee and his new employers were held jointly responsible for spoliation of possible evidence on the employee’s laptop. Both were ordered to pay $76,906.80 to plaintiffs after they partially won a successful motion for sanctions, broken down as $56,546 in attorney’s fees and $20,360.80 in forensic expert expenses. This was based on a “failure to preserve” theory, after plaintiffs had repeatedly asked for production and the ex-employee reformatted and then replaced his laptop hard drive.

     Plaintiffs had asked for a total of $104,340.80, but the court made reductions based on finding that (1) only 2 of 4 lawyers needed to be involved in the battle, and (2) plaintiffs received a narrower sanction (an adverse inference sanction) than the original broader request (necessitating a 30% reduction off the original request).

    Spoliation.  Etymology: Middle English, from Anglo-French spoliacion, Latin spoliation-, spoliatio, from spoliare to plunder — more at spoil.

Sanctions: Less Drastic Sanctions Than Evidentiary And Issue Sanctions Are In Order For Failing To Produce Computer Embedded Information During Trial

Fourth District, Division 3 Reverses Sanctions, Ordering Reimbursement of Trial And Additional Discovery Costs.

     As indicated on prior posts on e-discovery, litigators must be attuned to both pretrial, trial, and post-appeal sanctions that can be awarded against parties failing to produce computer embedded information. Here is one where the offending party got a break, but not much of one—especially if we are right about the fees and costs that must be paid for a 10 week-plus trial and additional discovery ordered as the proper sanctions.

     The case is Jneid v. TriPole Corp., Case No. G039500 (4^th Dist., Div. 3 Dec. 17, 2009) (unpublished), emanating out of our own local Fourth District, Division 3.

     There, purchaser of a computer firm’s assets was hit with a multi-million jury verdict in favor of the asset seller and certain employees for not making certain payments as a result of the buy-out. Ten weeks into the jury trial, seller produced 17,000 pages of computer embedded documents that were within the ambit of prior discovery activities. Purchaser was granted its request for issue and evidentiary sanctions by which seller could not use the tardily produced documents at trial, buyer could use them without any authentication, and seller was precluded from arguing that buy-out milestones were not reached—sanctions that the appellate court later characterized as akin to a directed verdict against seller.

     On appeal, the Fourth District, Division 3, in a 3-0 decision authored by Justice Rylaarsdam, reversed.

     The appellate panel found that the ultimate disclosure of the documents militated against the “directed verdict” sanction, with even the parties agreeing that payment of the costs of the completed trial (on a mistrial basis) plus costs associated with additional discovery resulting from the late production were less drastic sanctions that accomplished their punitive goals. We bloggers would surmise that this result might get the case settled, because assessment of even these less draconian sanctions—costs for a long jury trial and additional discovery—is going to be a heavy financial burden for the selling parties to meet.

Discovery Sanctions: $25,607.03 In Sanctions Affirmed Where Attorney Interposed Too Many Deposition Objections

Fourth District, Division 1 Did Vacate “Future Deposition” Sanctions.

     The next post is a very pragmatic one for litigators involved in discovery battles. Cutting to the chase, an attorney was hit with substantial fees (sanctions) for interposing over 300 objections during the course of some depositions. The Fourth District, Division 1 affirmed, although they did “throw out” $10,000 in future anticipated deposition costs, because the pertinent discovery statutes only encompassed “incurred” expenses.

     In Hallam v. Johnson (Butler), Case No. D054852 (4^th Dist., Div. 1 Dec. 15, 2009) (unpublished), a discovery referee recommended that an attorney should be sanctioned $35,607.03 in fees and costs (out of a requested $100,307.53, which was voluntarily reduced from an initial request of $112,243.52) for interposing meritless objections—over 300—at some depositions. Attorney appealed, and most of the award was sustained.

     Attorney initially argued that “defending” a deposition was not equivalent to “employing” a discovery method for sanction purposes under the Discovery Act. Wrong, said the appellate panel, analogizing to the reasoning of Pueblo v. Superior Court, 158 Cal.App.4^th 1242, 1248 (2008), which involved a supplemental discovery response dispute.

     Attorney then argued that the discovery referee/trial court erred in specifying the specific discovery statute utilized as a basis for the sanctions award. Wrong again, said the Court of Appeal, citing to Ghanooni v. Super Shuttle, 20 Cal.App.4^th 256, 261 (1993)—no such requirement exists in the discovery sanctions context.

     Attorney next complained that the sanctions motion was untimely because it occurred past the date for a timely motion to compel. Wrong yet again, because a discovery sanctions motion can be brought later. (London v. Dri-Honing Corp., 117 Cal.App.4^th 999, 1001 (2004).)

     However, Attorney did get a reprieve because the appellate court reversed the $10,000 component of the discovery sanctions award for future deposition costs, finding that Code of Civil Procedure section 2023.030 only authorizes recoupment of sanctions for incurred expenses.

     End result: appellate court reduced the sanctions award by $10,000, meaning that Attorney was still out $25,607.03 in sanctions. Moral of the story: Be careful how (and how often) you object during depositions!

Discovery Sanctions: Sanctions Against Litigants’ Attorneys Reversed Where Evidence Showed Client Was Responsible For Sanctionable Conduct

Second District, Division 2 Reverses $3,387.50 Sanctions Award Against Attorneys.

     Under various discovery statutes, the trial court has discretion to award discovery sanctions jointly and severally against losing litigant and/or their attorneys. However, attorneys have another defense in their quiver—the “my client made me do it” defense.

     The Court of Appeal is Manzanares v. Bertolino (Marcus, Watanabe, Snyder & Dave, LLP), Case No. B211652 (2d Dist., Div. 2 Nov. 24, 2009) (unpublished) reversed a $3,387.50 discovery sanction awarded against attorneys as well as their clients. Reason: under Ghanooni v. Super Shuttle, 20 Cal.App.4^th 256, 261 (1993), an attorney can avoid sanctions if he advised the client to not engage in the conduct resulting in the sanctions but the client persisted (making client solely responsible for the sanctionable conduct). Attorneys on appeal were successful, because they did submit evidence in the trial court—unrebutted evidence—demonstrating client was solely responsible.

     BLOG UNDERVIEW—Attorneys need to be careful on using this discovery sanctions “defense,” because it likely implicates privileged conversations and may create a conflict in interest with the client that may want to be avoided, depending on the circumstances of course.

Discovery Sanctions: $3,587.00 Deposition Sustained Because It Is Collateral And Not Independently Appealable Until Later

 

Sixth District Provides a Good Lesson in Properly Timing Appeal of Discovery Sanctions Under $5,000.

     This next unpublished case, in a 3-0 unpublished decision from the Sixth District, is a good reminder on when the appeal of smaller discovery sanctions orders—under $5,000—is properly made.

     In Stough v. Klure, Case No. H034000 (6^th Dist. Oct. 26, 2009) (unpublished), defendant/appellant was sanctioned a total of $3,587 for refusing to submit to questioning under oath at a deposition (a sanctions imposed in late February 2009 arising from a mid-January 2008 deposition). Four days prior to the sanctions order, the trial court denied defendant’s summary judgment motion. Unhappy about the sanctions, defendant appealed.

Discovery Sanctions: Monetary And Terminating Sanctions Affirmed For Repeated Discovery Disputes

Fourth District, Division 3 Finds Sanctions Were No Abuse of Discretion.

     The next case is one in which the Fourth District, Division 3 affirmed monetary and terminating sanctions against either plaintiff’s attorney or plaintiff based on failure to respond to requests or failing to be candid in electronic discovery matters. This shows how one needs to be diligent in discovery, responding once extensions have expired and investigating issues relating to e-discovery—and being candid to opposing counsel and the court in the process.

     Most of the monetary sanctions in Estrada v. Delhi Community Center, Case No. G040405 (Oct. 20, 2009) (unpublished) were sustained against plaintiff’s attorney Jim Toledano. Outside of the merits, he never appealed the sanctions assessed only against him as an attorney, but only appealed through plaintiff. However, plaintiff did not have standing to challenge sanctions against Mr. Toledano, who had a distinct right to appeal the sanctions orders. (Lachkar v. Lachkar, 182 Cal.App.3d 641, 645 n.1 (1986); 20^th Century Ins. Co. v. Choong, 79 Cal.App.4^th 1274, 1277 (2000); Calhoun v. Vallejo City Unified School Dist., 20 Cal.App.4^th 39, 42 (1993).) However, the monetary sanctions were justified on the merits, where the circumstances showed either (1) Mr. Toledano only provided responses on the eve of a motion to compel hearing after indicating that he was too busy or attending to his father’s estate, or (2) Mr. Toledano refused to produce certain photographs without showing the refusal was justified.

     With respect to terminating sanctions, plaintiff’s installation of a new operating system that damaged existing data was found to be prejudicial when her attorney was alerted by defense counsel that plaintiff’s home computer would be sought long before installation of the new operating system that did result in some data alteration. Spoliation of evidence only needs some showing that the documents were potentially relevant to the litigation, as the e-documents were to plaintiff’s emotional distress claims. (Leon v. IDX Systems Corp., 464 F.3d 951, 959 (9^th Cir. 2006).) [BLOG OBSERVATION—This shows the wisdom of sending a “duty to preserve” warning to the other side in cases involving e-discovery.]

Discovery Sanctions: California Court Of Appeal Affirms $6,632.50 In Discovery Sanctions Against Party Who Failed To Adequately Answer Special Interrogatories

Published Decision Is Must Reading For All Litigators Engaged in Discovery Disputes.

     We knew that we would enjoy the next decision, because it analogizes discovery disputes to the imagery of Hotspur (Henry Percy)—who is graphically depicted in Shakespeare's Henry IV as being blinded by a combative nature and incapable of informally resolving a disagreement with the King (a trait that ultimately cost him his life). The case is Clement v. Alegre, Case No. A123168 (1^st Dist., Div. 2 Sept. 23, 2009) (certified for publication).

     In Clement, defendant served some special interrogatories seeking to obtain information of plaintiffs' damages, causation, and the existence of a loan commitment. However, plaintiffs objected on the basis that "economic damages" was vague and the interrogatories violated the self-containment rule. Meet and confers were engaged in, but plaintiffs stood their ground (a la Hotspur). A discovery referee was not impressed, ordering further answers and sanctioning plaintiffs in the amount of $6,632.50. Plaintiffs (a la Hotspur) appealed.

     Plaintiffs (a la Hotspur) lost the appellate battle, too.

     Clement is must reading on several points:

     · Misuse of the discovery need not be willful in order to justify monetary sanctions—it must be without substantial justification or evasive in nature;

     · The self-containment rule is not so ironclad that it should be applied in the absence of its rationale to prevent exceeding the numerical limit for special interrogatories;

     · A compound objection should likely be sustained only where more than a single subject is covered by an interrogatory;

     · The meet and confer process is just that—both parties must make a serious effort to negotiate and reach an informal resolution, with mere argument and bickering not being tantamount to a good faith attempt at informal resolution.

     BLOG FAVORITE QUOTE—"More than 10 years ago, Townsend v. Superior Court (1998) 61 Cal.App.4^th 1431 lamented the all too often interjection of 'ego and emotions of counsel and clients' into discovery disputes, warning that '[l]ike Hotspur on the field of battle, counsel can become blinded by the combative nature of the proceeding and be rendered incapable of informally resolving a disagreement.' (Id. at p. 1436.)"

     BLOG UNDERVIEW—Los Angeles County Superior Court Judge Terry Green actually requires attorneys to personally meet and confer when discovery disputes arise. He suggests that much gets done over a cup of coffee or a glass of Merlot. We tend to agree.

E-Discovery: Sanctions Result In 35% of Decisions Addressing These Issues

Mr. Segal So Reports in Recent California Lawyer Article.

     We would like to thank Mr. Perry L. Segal, an IT executive turned e-discovery attorney and consultant, for an interesting statistic he provided in his article “E-Discovery: New Rules, Big Headaches,” published in the September 2009 California Lawyer.

     Mr. Segal reports that it’s estimated that out of all case law that addresses e-discovery issues, more than 35% result in sanctions.

     Based on this statistic, Mr. Segal suggests that practitioners tackle e-discovery with the “W5+H” approach:

• Who should be involved?
• What data are you looking for?
• When are the due dates?
• Where is the data?
• Why is it relevant?
• And how will you comply?

E-Discovery Monetary Sanctions: Recent Maryland Federal Court Decision Nicely Summarizes Circumstances Justifying Monetary Cost/Fee Awards For Spoliation

Case Also Addresses Other E-Discovery Issues of Interest.

     Although we usually review only California decisions, a recent federal decision has a nice summary of the most typical situations justifying imposition of costs or attorney’s fees in instances where there was spoliation of potential evidence during the discovery phase of a case or after the litigant was on notice that the potential evidence should be preserved. Because California just enacted discovery amendments relating to electronic discovery, the next case is a good one to discuss with respect to the circumstances that normally will give rise to costs and fees as spoliation “sanctions.”

     U.S. Magistrate Judge Paul W. Grimm, in Goodman v. Praxair Services, Inc., __ F.Supp.2d __, 2009 WL 1955805 (D.Md. July 7, 2009), listed these situations as the typical ones when courts will grant an award of costs or attorney’s fees when ruling on a spoliation motion:

• First, courts will award legal fees in favor of the moving party as a less drastic alternative to dismissal or an adverse jury instruction;
• Second, courts will grant discovery costs to the moving party if additional discovery must be performed after a finding that evidence was spoliated;
• Third, in addition to a spoliation sanction, a court will award a prevailing litigant the litigant’s reasonable expenses incurred in making the motion (including attorney’s fees); and
• Fourth, in addition to a spoliation sanction, a court will award a prevailing litigant the reasonable costs associated with the motion plus any investigatory costs into the spoliator’s conduct. (Id. at *22.)

     Goodman also discussed these issues of importance in the electronic discovery area: (1) factors to be assessed in determining the timeliness of a spoliation motion; (2) whether the defense had a duty to preserve documents in the possession of third party consultants; (3) events that trigger the duty to preserve material evidence during a dispute; (4) delineation of “key players” and “control” for purposes of determining preservation of evidence duties; and (5) the different states of mind that demonstrate culpability for a spoliation determination, along with how those states of mind impact the severity of the sanction to be imposed by the federal judge.

Discovery Sanctions: Appearing And Arguing The Merits Forfeits Challenge To Inadequate Notice

 

First District, Division 5 Affirms Discovery Sanctions Award Against Husband and Husband’s Attorney.

     In In re Marriage of Moses and MacCallum, Case No. A121057 (1^st Dist., Div. 5 Aug. 13, 2009) (unpublished), the appellate court affirmed joint sanctions of $2,000 assessed against husband and his attorney in a dissolution proceeding involving discovery abuses related to a deposition notice sent to wife when the dissolution was effectively concluded, with husband and his attorney giving conflicting reasons for its relevance. Although affirming the result, the decision does have an important reminder to litigants challenging a decision based on inadequate notice. Husband/his attorney claimed that the sanctions order was erroneous based on inadequate notice although attorney appeared and argued the merits, not asking for a continuance or demonstrating prejudice. The Court of Appeal, in sustaining the order, pointed out that husband/his attorney forfeited the inadequate notice argument by appearing and arguing the merits of the motion without asking for a continuance. (Carlton v. Quint, 77 Cal.App.4^th 690.) So, if you are going to challenge notice, make sure that you request a continuance and don’t argue the merits to avoid the grim consequences of the waiver confronted by the appellants in the dissolution matter.

RFA Cost-Shifting: Court Of Appeal Affirms $165,724.65 Award For Plaintiff's Failure To Admit The Truth of RFAs Of Substantial Importance In Accounting Malpractice Case

Second District, Division 1 Finds Award Was No Abuse of Discretion.

     In our category "Requests for Admissions," we have discussed numerous cases where substantial fees and costs have been awarded or not awarded when a litigant (usually a defendant) challenged a plaintiff's refusal to admit the truth of certain requests for admissions. Code of Civil Procedure section 2033.420(a) imbues a trial court with discretion to shift costs unless it concludes that the other party had a reasonable ground to believe it would prevail on the matter not admitted (see subdivision (b) caveat). Here is another example of a case of where a substantial RFA cost-shifting award was sustained on appeal.

     Housing Authority of the City of Los Angeles v. KPMG LLP, Case No. B207313 (2d Dist., Div. 1 July 20, 2009) involved a situation where plaintiff lost an accounting malpractice case on summary judgment to KPMG based on the bar of applicable statutes of limitations. In addition, the trial court granted KPMG's motion for fees and costs of $165,724.65 because plaintiff denied RFAs of "substantial importance" tending to expose that plaintiff knew or should have known of the claims against the accounting firm more than two years before filing of the complaint.

     On appeal, the RFA costs award was affirmed. The record showed that subsequent declaration testimony by one of plaintiff's current higher-ups did confirm that he received and discussed a draft audit report, even though these facts were not admitted previously. Given the import of this draft audit report in the scheme of things, no abuse of discretion was committed in awarding the substantial fees and costs against plaintiff.

E-Discovery: Georgia Federal Court Orders Defendant To Reimburse Plaintiff $1,022,700 In Attorney's Fees And Costs As Discovery Sanction

District Court Opts for Sanctions Rather Than Entering Astronomical Default Judgment.

     This one certainly caught our eye and illustrates how e-discovery sanction can involve steep reimbursement of significant attorney's fees and costs.

     In Kipperman v. Onex Corp. (Kipperman II), 2009 U.S. Dist. LEXIS 44457 (N.D. Ga. May 26, 2009), a district judge found that defendants had engaged in a "textbook case of discovery abuse" by stonewalling its production of "hot" emails and leading the plaintiffs to believe that they were not relevant. Hardly the case, with the defense unilateral decisions being nixed by the district judge after finding that many of the emails "certainly are hot."

     The district judge then addressed the nature of the sanction to be imposed on the defense for discovery abuse. If he had struck the defendants' answer, it would have resulted in one of the largest default judgments in a case presenting novel issues. Instead of doing this, the district judge opted to order defendants to reimburse plaintiffs $1,022,700 in attorney's fees and costs as a discovery sanction. This lesser sanction was imposed because the defense did eventually produce the documents and supplemental discovery follow-up could cure any prejudice.

                              "Broadaxe".  From Wikipedia article.

Civil Code Section 1717: Bankruptcy Related Actions Were Recoverable By Successful Lender

Fourth District, Division 1 Finds No Basis To Assess Fees Against Nonsignatory Individual Principal In the Absence of an Alter Ego Finding.

     In New Century Corporation v. Positive Investments, Inc., Case No. ECU03797 (4^th Dist., Div. 1 July 8, 2009) (unpublished), lender was awarded attorney's fees of $83,329 under an attorney's fees clause of a loan agreement (out of a requested $114,339.77 in fees) against a defaulting borrower who fraudulently quitclaimed to a new entity and then filed serial bankruptcies forcing lender to take bankruptcy actions that eventually resulted in dismissal of the bankruptcy cases. (The bankruptcy judge ordered sanctions against the fraudulent transferee, transferee's principal Mr. Lo, and transferee's bankruptcy counsel.) However, the trial court refused to award fees against Mr. Lo, who was not a signatory to the loan agreement (being only the principal of the borrower signatory). Borrower appealed, and lender cross-appealed.

Discovery Sanctions: Fifth District Reverses $1,190 Sanctions Award Against Plaintiff When Trial Court Granted Reconsideration On Tardy Expert Witness Augmentation

Fifth District Found That Absence of Sanctions Request in Motion for Reconsideration Meant the Award Violated Due Process.

     Frequently, we have discussed sanctions awards that are vacated because they do not comply with due process. Here is another one, occurring in connection with a successful defense reconsideration motion regarding a tardy expert witness augmentation.

     In Vargas v. Bakersfield Ranch Market, Case No. F055788 (5^th Dist. July 6, 2009) (unpublished), plaintiff moved to augment her expert witness designation to name a new expert. Defendant opposed the motion and requested sanctions in its opposition, with the trial court granting the motion and denying the sanctions request. Because of scheduling issues that prevented the newly designated expert from being available for a deposition before the deadline set forth in the augmentation order, the defendant moved for reconsideration (but made no request for sanctions). The lower court granted the reconsideration motion, striking the augmented expert designation and imposed sanctions of $1,190 against plaintiff and her counsel. (The $1,190 apparently was an award of attorney's fees to defense counsel.) Plaintiff moved for reconsideration of the sanctions award, which was denied. Plaintiff appealed, claiming the award was made without notice, in violation of due process.

     The Fifth District, in a 3-0 opinion authored by Justice Hill, agreed.

                                  Lack of Due Process

Discovery: Governor Schwarzenegger Signs New E-Discovery Rules Into Law

Rules Go Into Effect Immediately.

     Because discovery disputes can carry monetary sanctions (including attorney’s fees), we alert readers to the fact that effective June 29, 2009, California has new statutory provisions relating to electronic discovery. Assembly Bill No. 5 adds Code of Civil Procedure sections 1985.8 and 2031.285 as well as amends sections 2016.020, 2031.010, 2031.020, 2031.030, 2031.040, 2031.050, 2031.060, 2031.210, 2031.220, 2031.230, 2031.240, 2031.250, 2031.260 2031.270, 2031.280, 2031.290, 2031.300, 2031.310, and 2031.320.

Discovery Sanctions: $2,265 Sanctions For Nonparty’s Failure to Appear At Discovery “Records and Appearance” Deposition Affirmed On Appeal

First District, Division 3 Resolves Conflict Between CCP sections 1987.5 and 2020.510(b).

     A percipient nonparty witness was served with a deposition subpoena commanding him to give testimony and produce documents during the discovery process. However, the subpoena had no affidavit or declaration of good cause. Nonparty banked on the invalidity of the subpoena because Code of Civil Procedure section 1987.5 says that such a deposition subpoena is not valid unless a copy of the affidavit upon which the subpoena is based happens to be attached to the deposition notice. The lower court disagreed, sanctioning nonparty $2,265 for failure to appear at the scheduled deposition. Nonparty did not like the result (obviously), and appealed.

     The First District, Division 3, in Terry v. SLICO, Case No. A123310 (1^st Dist., Div. 3 June 25, 2009) (certified for publication), affirmed the sanctions order.

Discovery Sanctions: $6,477.86 Fee Award Against Attorney For Failure To Attend Deposition Sustained On Appeal

 

Second District, Division 8 Rejects Challenges to Fee Award.

     In Barba v. Anderson-Mota, Case No. B206213 (2d Dist., Div. 8 June 24, 2009) (unpublished), plaintiff's attorney was two hours late in attending a noticed deposition of his client, after leaving a message he would be an hour late and then being inaccessible for any follow-up conversations. Although plaintiff showed up, defense counsel terminated the deposition after an hour, causing inconvenience for attorneys representing other parties who also showed up for the deposition. Defense counsel asked for a voluntary reimbursement of $1,700 to cover some of his time and hard costs such as the court reporter and Spanish language interpreter, threatening a sanctions motion if this was not paid. No response. The trial court awarded combined sanctions of $6,477.86 against plaintiff's attorney, divided among four set of inconvenienced counsel.

     Plaintiff's attorney appealed, and did not fare well.

     The trial court did not abuse its discretion in sanctioning the attorney because "defense counsel was not obligated to wait around under [the] circumstances and continue to bill time to their clients."

     Aggrieved attorney argued a written statement of decision was required, but that contention was rejected when it came to discovery sanctions. (See California Shellfish, Inc. v. United Shellfish Co., 56 Cal.App.4^th 16, 25-26 (1997).)

     Sanctions are also appropriate on the motion of other parties attending the deposition, Code Civ. Proc., § 2025.450(c)(2), with formal or informal joinders in the motion adequately preserving the issue and avoiding unnecessary duplication.

     Moving party's request for voluntary compensation adequately satisfied the meet and confer requirement.

     So, in the end, plaintiff's attorney had to absorb the sanctions, with the defendants also winning their appellate costs for prevailing on appeal.

Lemon Law: Appellate Court Affirms $344,600 Fee Award, Adds Another $57,587 For Discovery Referee Fees, And Remands For More Postjudgment Fees

Fourth District, Division 3 Affirms and Augments Fee Awards, After Also Determining that Defense Tactics Required Terminating Sanctions For Bad Faith Discovery Abuses.

     Here is another wild one, dictated by the unusual set of facts at play. It is also a modern day parable reminding all litigators that they need to avoid “hiding the ball” during discovery. The decision also reinforces that, by and large, trial court reductions for inefficiencies and padding will be affirmed under the deferential abuse of discretion review standard.

     Doppes v. Bentley Motors, Inc., Case No. G038734 (c/w other cases) (4^th Dist., Div. 3 June 8, 2009) (certified for publication) was a 3-0 decision emanating from our local Santa Ana Court of Appeal, authored by Justice Fybel. The opinion is not only interesting reading, but reinforces that litigation attorneys will be punished for discovery abuses—with appellate jurists determining that punishment should be increase over and above recommendations by discovery referees and trial judges. However, the case also happens to be instructive in the attorney’s fees area.

     Briefly summarized, plaintiff won a lemon law vehicle case against a defendant based on the car having an obnoxious odor in the interior. Defendant engaged in numerous discovery tactics that led to numerous terminating sanctions requests (including behavior relating to defendant’s failure to produce responsive e-mails), but the discovery referee recommended giving--and ultimately the trial court only gave—an adverse jury instruction. The jury awarded plaintiff $214,300 as vehicle reimbursement and additional prejudgment interest (with the prejudgment interest determination affirmed in a separate opinion). Plaintiff moved to recover $586,844.63 in attorney’s fees under Civil Code section 1794(d), a mandatory, plaintiff-oriented, fee-shifting provision. The trial court actually awarded plaintiff $344,600 in fees based on its own detailed spreadsheet analyzing the specific fee substantiation. The lower court denied all paralegal time billed; disallowed $53,213 as time spent against another nonliable party and on unsuccessful claims; reduced the billing rate of the lead attorney from $400 to $300 per hour; allowed recovery for only one attorney at trial; disallowed all time billed for sanctions motions before the discovery referee; and reduced the amount billed by one attorney’s office by 25% “for general excessive time billing for items.” Plaintiff later moved for further postjudgment attorney’s fees of $72,789.80, but the trial court only awarded $4,427. Plaintiff appealed.

Federal Discovery In Post-Trial Fee Proceedings: San Diego Federal Magistrate Rules Discovery Must Be Discrete and Limited in Nature

Magistrate Also Rules that Post-Trial Expert Fee Declarations Are Not Subject to Pre-Trial Expert Report Disclosure Requirements.

     This next post discusses a topic that we have seen very few decisions on: the scope of federal discovery in post-trial fee proceedings, which are usually based on affidavits or declarations submitted by the attorneys requesting fees or experts opining on the reasonable hourly rate or reasonableness of fees being requested in a certain case.

     U.S. Magistrate Judge Ruben B. Brooks, who sits in the United States District Court for the Southern District of California, made these useful points in rulings (click here: Download May182009OrderbyRBB) in Gonzales v. Arrow Financial Services LLC, Civ. No. 05cv0171 JAH (RBB) (S.D. Cal. May 18, 2009) (Document 237) in a fee proceeding by which winning plaintiffs’ attorneys have sought fee recovery under the Fair Debt Collections Practices Act (federal statute and California counterpart with fee-shifting provisions):

• The court may determine that discovery under F.R.Civ. P Rules 26-37 would be useful to the parties only “on rare occasion” (F.R.Civ. P. 54 advisory committee notes on 1993 amendment to Rule 54(D)(2)(C));
• A district court does not abuse its discretion by refusing to allow the opposing party to take additional discovery and instead relying on affidavits and argument on the motion for attorney’s fees in making its decision (Williams v. Alioto, 625 F.2d 845, 849 (9^th Cir. 1980));
• Limited discovery was in order for purposes of producing any contemporaneous time billing records where one attorney added some additional time from reconstructed records or recollection;
• Limited discovery also was proper to show the actual rates that attorneys had charged clients in other cases where fee petitions were brought;
• Post-trial declarations by fee experts relating to reasonableness of hourly rates or other issues do not require compliance with expert report disclosure requirements under F.R.Civ.P. 26 (Rule 26(a)(2)(A),(B) applies to trial experts; see also McCulloch v. Hartford Life & Acc. Ins. Co., 223 F.R.D. 26, 29 (D.Conn. 2004) [experts offered solely on the issue of reasonable attorney’s fees “are exempt from providing a report”]); and
• No deposition discovery of the fee experts was warranted, under the circumstances, because it would merely prolong litigation on the fee motion (Williams, supra, 625 F.2d at 849 [opposing party not entitled to discovery if plaintiff has submitted sufficiently detailed affidavits in support of the fee petition]).

Costs Memorandum Following Voluntary Dismissal: Court Of Appeal Determines No Proposed Judgment Needs To Be Additionally Filed

First District, Division 3 Disagrees With Weil & Brown Treatise Commentary.

     After plaintiff voluntarily dismissed her action, two defendants timely filed cost memoranda, but did not submit proposed judgments in addition to the memoranda. Plaintiff argued that the failure to submit these extra proposed judgments barred recovery of costs based primarily on a commentary found in Weil & Brown’s venerable “Civil Procedure Before Trial” practice treatise published by The Rutter Group. The trial court rejected the notion that the failure to file the proposed judgment document rendered meaningless the costs memorandum, approving the two cost bills after taxing a few items. Plaintiff, still disgruntled, appealed.

     The First District, Division 3, in Fries v. Rite Aid Corporation, Case No. A120488 (Apr. 22, 2009) (certified for partial publication), affirmed the costs judgment. California Rules of Court, rule 3.1700 plainly states that a costs memorandum must be served and filed within 15 days after, among other things, service of written notice of entry of judgment or dismissal. That was plain enough to show that the entry of the dismissal triggered the time to file a cost memorandum, with no authority supporting the view “that a voluntarily dismissed defendant must file a proposed judgment of dismissal together with the memorandum of costs.” (Slip Opn., at p. 5.)

E-Discovery: Outside Law Firm and One Of Its Partners Stung By Fees And Expenses For Not Producing Native Formatted Database

U.S. Magistrate Finds No Substantial Justification For Not Producing Materials As Called For in Defense Discovery Requests.

     In our post of July 30, 2008, we reported on the Qualcomm decision, where substantial discovery sanctions were imposed upon attorneys for e-discovery disputes that were not discovered until during the course of trial. The next case involves sanctions imposed against attorneys, albeit at pretrial stages before the occurrence of a trial.  Once again, discovery bytes back.

     U.S. Magistrate Judge Karla R. Spaulding, in Bray & Gillespie Mgt. LLC v. Lexington Ins. Co., 2009 U.S. Dist. LEXIS 21250, 2009 WL 546429 (M.D. Fla. Mar. 4, 2009), found that a plaintiffs’ outside law firm and one partner had to jointly and severally pay the reasonable attorney’s fees, costs, and expenses for motions for sanctions relating to the defense’s successful efforts in obtaining a previously unproduced database in native format, as well as the expenses of the defense forensic computer expert and the costs to examine/convert the information into usable form—likely hundreds of thousands of dollars.

Appeal Sanctions: Attorney Losing Discovery Sanctions Is Also Hit With Appellate Sanctions Of $23,343,75

Second District, Division 8 Gives a “Double Whammy.”

     In line with suggestions we have made in prior posts, appellate practice in California is a specialty. Do not get involved and do not lightly appeal abuse of discretion rulings unless you consult an appellate specialist or have practiced before the California appellate courts. The next case is a stark reinforcement of the wisdom of these suggestions.

     A contentious family law surrogacy dispute involved “parents” squabbling about numerous subjects, primarily centering about mother’s lifestyle, child’s support requirements, sperm donor’s (dad’s) child visitation rights, and overall paternity issues.

     Dad’s attorney was hit with $5,000 in discovery sanctions after discovery was sent covering, among other things, subjects such as mother’s topless dancer, actress, and Internet bikinis enterprising activities. Dad’s attorney was miffed at these sanctions and appealed as objector.

     Attorney lost both the merits and more in Abbot v. Kitts, Case No. B200824 (2d Dist., Div. 8 Apr. 7, 2009) (unpublished). The discovery sanctions were found justified by the appellate court. However, it went farther. The panel found that attorney’s appeal was frivolous under Code of Civil Procedure section 907, citing In re Marriage of Flaherty, 31 Cal.3d 637, 650 (1982) [one of our Leading Cases] in support of the result. Mother was awarded an extra $23,343.75 for attorney’s frivolous appeal.

     Quote of the Day—“ … an attorney is never justified in taking such wholly unmeritorious positions before the court, even if requested to do so by a client. It is the attorney, not the client, who is the professional occupying a trusted position as an officer of the court. He must resist the misguided or improper urgings of his vengeful, angry, or merely ignorant client.” (Bauer, J., sitting by assignment, on behalf of the 3-0 panel.)

Discovery Sanctions: Court Of Appeal Sustains $29,180 Discovery Sanctions Fee Award

Fourth District, Division 2 Finds Winning Litigant Properly Allocated Fees.

     In Bohl v. Pryke, Case No. E045405 (4^th Dist., Div. 2 Apr. 1, 2009) (unpublished), a defendant in a “reporter’s shield law” case refused to reveal sources. However, he also apparently refused to answer legitimate discovery, drawing the lower court’s ire. The trial court struck his answer, resulting in a default and eventual default judgment against defendant. The appellate court reversed and reinstated defendant’s answer, but remanded to see if other sanctions were warranted.

     On remand, the lower court awarded plaintiff attorney’s fees of $29,180 (out of a requested $70,815) as a discovery sanction. Defendant appealed again.

Terminating Sanctions And Substantial Default Judgment Reversed Because Of Failure To Show Willfulness

Sixth District Vacates $730,466.10 Default Judgment and Reinstates Defendant’s Answer.

     The next case is a good example of the POOF! principle. Plaintiff obtained a $730,466.10 default judgment against defendant, set up by the trial court’s grant of terminating sanctions for failure to respond to discovery requests. The only problem is that the record did not show willfulness in failing to comply with discovery requests. You know what the result was—POOF!

Sanctions: Court of Appeal Vacates Discovery Sanctions Against Defendant With Respect To Form Interrogatory Responses

Second District, Division 3 Calls Into Question Whether Defense Needs to Answer Some Personal Injury Questions in Many Cases.

     Discovery is the bane of most litigators’ existence. It is freely allowed (subject to certain limitations)—vacillating from tedious and time consuming (at one pole) to burdensome and extremely expensive (at the other side of the spectrum). In California state court cases, any litigant can propound form interrogatories that do not even count against the 35 interrogatory numerical limit (which can be exceeded in more complex cases upon counsel’s declaration). Two form interrogatories figured greatly in the next case we discuss.

     In Randell v. Superior Court, Case No. B213134 (2d Dist., Div. 3 Feb. 26, 2009) (unpublished), defendant in a personal injury was assessed $750 in discovery sanctions for objecting or not fully answering Form Interrogatory Nos. 10.2 and 16.9. Defendant sought a writ of mandate to overturn the discovery order and sanctions. He obtained mandate by which no answers were required and sanctions were vacated.

     Here is the reasoning behind the mandate issuance:

Discovery Sanctions: $6,000 In Discovery Sanctions Affirmed Against Alter Ego Defendant For Failing To Respond To Written Discovery

Second District, Division Two Discusses Aggregation Appealability Rule and Litigant’s Discovery Obligations.

     The next case we discuss has an interesting discussion of the aggregation appealability rule (sanctions order must exceed $5,000) and a litigant’s discovery obligations (even an alter ego defendant must provide discovery information of which he is aware, even if the defendant was not individually a party to the operative contracts).

     Uneeda Enterprises v. Dekar Industries (Karawia), Case No. B207614 (2d Dist., Div. 2 Dec. 30, 2008) (unpublished) involved an alter ego defendant stung with sanctions of

Enacted and Vetoed California Legislation Involving Attorney's Fees in 2008

Two Bills Enacted; One Vetoed

     Although a considerable segment of the state government's resources was consumed with general budgetary wrangling, two bills were enacted (effective January 1, 2009) and one bill vetoed with features involving attorney's fees/cost awards.

Sanctions: Evidence and Adverse Jury Instruction Sanctions Not Allowed For Document Production Transgression Absent Failure To Obey An Order Compelling A Further Response

Second District, Division Three Decides Sanctions Unwarranted Because The Underlying Conduct Was Not Egregious in Nature.

     In New Albertsons, Inc. v. Superior Court (Shanahan), Case No. B207661 (2d Dist., Div. 3 Dec. 10, 2008) (certified for publication), the Court of Appeal—in a 3-0 opinion authored by Presiding Justice Croskey—issued mandate to allow withdrawal and amendment of a request for admission response and overturning nonmonetary sanctions (e.g., an evidence sanctions and adverse jury instruction on spoliation) because no prior order had been entered compelling a further response to a relevant document demand.

     Many of the discovery statutes state that the court can impose issue, evidence, or terminating sanctions only if a party fails to obey a court order compelling discovery. The New Albertsons court strengthens this general principle in the context of many discovery/spoliation disputes. It also distinguishes decisions such as Do It Urself Moving Storage, Inc. v. Brown, Leifer, Slatkin & Berns, 7 Cal.App.4^th 27 (1992), Vallbona v. Springer, 43 Cal.App.4^th 1525 (1996), Pate v. Channel Lumber Co., 51 Cal.App.4^th 1447 (1997); Williams v. Russ, 167 Cal.App.4^th 1215 (2008); Karlsson v. Ford Motor Co., 140 Cal.App.4^th 1202 (2006); and Mileikowsky v. Tenet Healthsystem, 128 Cal.App.4^th 262 (2005) as involving egregious misconduct, violations of agreements to preserve evidence, a willful pattern of discovery abuses, or misrepresentations about the existence or availability of certain proof.

     Based on the policy favoring adjudications on the merits, the Second District, Division Three also overturned the trial court’s decision to not allow amendment of a request for admission, determining that the admission withdrawal was not substantially prejudicial or that the mistake was inexcusable in nature.

     BLOG BONUS COVERAGE—A similar result was reached in an unpublished Fourth District, Division Three opinion authored by Justice Fybel. In Miley v. Lopez, Case No. G032106 (4^th Dist., Div. 3 July 20, 2004) (unpublished), a trial court precluded a defendant from testifying in a car accident case, through plaintiff's in limine motion, based on defendant's failure to appear at a deposition four months earlier. The Court of Appeal reversed this evidentiary sanction because the specific deposition discovery statute required that defendant first disobey an order compelling his deposition attendance/testimony before more draconian sanctions could be imposed. (See Slip Opn., at 10-11, relying on Code Civ. Proc., § 2025(j)(3).) Because no prior order was obtained compelling a deposition which was disobeyed, the pretrial preclusion order was erroneous. Justice Fybel also distinguished Do It Urself Moving and Pate, finding that there was no showing that a motion to compel the deposition would have been futile or would have failed to produce the desired result. Horvitz & Levy, by the way, was winning appellate counsel in both New Albertsons and Miley (with the appellate work headed by David Axelrad).

Discovery Sanctions: Litigant Not Awarded Additional Sanctions Where Request Was Only Contained At The Conclusion of the Supporting Memorandum

 

Second District, Division One Finds No Abuse of Discretion In Denying Further Sanctions.

     In our October 14, 2008 post, we reviewed The Capital Gold Group v. Michael Thomas Media Group, a Second District, Division 5 decisions reversing a sanctions award because the notice of motion for sanctions failed to identify the object of the sanctions request. Now, the Second District, Division 1 has followed suit in a recent unpublished opinion.

     Cody v. Hester, Case No. B200335, B200887, & B203737 (2d Dist., Div. 1 Oct. 30, 2008) (unpublished) concerned a party who won some discovery sanctions but appealed because greater sanctions were thought justified.

     The Second District, Division One rebuffed the request for further sanctions on much the same ground as relied on by its sister division in The Capital Gold Group case. Appellant only sought sanctions in references at the conclusion of her memorandum of points and authorities, not in the notice of motion. This was deficient: “General citations to discovery statutes in the conclusion of her memorandum in support of her motion for sanctions was insufficient notice to justify her request for sanctions.” The appellate court also relied on Code of Civil Procedure sections 2023.030 and 2023.040, which require that the sanctions request be precisely delineated in the notice of motion.

Discovery Sanctions Orders Against Counsel Reversed Because Notices Of Sanctions Motions Were Not Sufficiently Certain In Identifying The Objects Of The Sanctions Requests

Second District, Division Five Reverses Discovery Sanctions Imposed Against Client and Its Law Firm.

     The next case is a good reminder that discovery sanctions motions need to be explicit in mentioning the persons against whom the sanctions are directed in the actual motion. Failure to be precise in this context may mean that an actual sanctions award is reversed by the appellate court.  That is exactly what happened in the case we next review.

     In The Capital Gold Group v. Michael Thomas Media Group (Skousen Law), Case No. B203692 (2d Dist., Div. 5 Oct. 14, 2008) (unpublished), a client and its law firm were assessed with monetary sanctions for misuse of the discovery process.  Because the notices of motions requesting sanctions failed to identify the persons against whom sanctions were sought, the appellate court found the notices were defective and reversed total sanctions of $8,790 ordered payable by client and law firm ($5,250 jointly and severally against both and an additional $3,540 against client). 

     The fundamental defect was that the notices of motions for both sanctions requests failed to identify the person, party, or attorney against whom the monetary sanctions were being sought, even though the supporting memoranda did provide some added clarity.  However, the clarity in the supporting briefs was not enough.

     Code of Civil Procedure section 2023.040 provides that the notice of a sanctions motion in a discovery context must "identify each person, party, and attorney against whom the sanctions is sought, and specify the type of sanction sought."  Citing Corralejo v. Quiroga, 152 Cal.App.3d 871, 874 (1984) and Sole Energy Co. v. Hodges, 128 Cal.App.4th 199, 207-210 (2005), the appellate panel concluded that it was mandatory that the putatively sanctioned party or attorney be identified in the notice of motion.  Because neither was identified in this case, the orders imposing sanctions "were unauthorized and must be reversed," having "not compl[ied] with due process and the express notice requirements of Code of Civil Procedure section 2023.040."

      Stern message from this case:  make sure your notices of motion clearly delineate against whom sanctions are requested in order to survive on appeal.  Even under the deferential abuse of discretion standard, appellate courts will find such an abuse when the transgression falls outside the confines of clear legal dictates (such as section 2023.040 requirements).   

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. 

            

            

            

Sixth District Demonstrates Application Of Abuse of Discretion Standard … But Also Speaks Out On Whether Opposition’s Fees Are Probative In Fee Proceedings

Court of Appeal Sustains Lower Court Determination That Opposition Fee Effort Does Not Have To Be Considered.

            Plaintiff and defendants settled a Home Equity Sales Contract Act case that crops up frequently in this age of subprime lender fallout cases.  A settlement was reached by which the trial court was imbued with discretion to award “reasonable attorneys fees and costs” under the Act.  Plaintiff subsequently moved for and received all of the requested attorney’s fees in the amount of $120,673.  Defendants appealed and lost.

            In Reyes v. Hoekstra, Case No. H031495 (6^th Dist. Sept. 4, 2008) (unpublished), the appellate court—based on concessions by the parties in their appellate briefs—reviewed the award under the abuse of discretion standard.  There is a nice review of lodestar and appellate abuse of discretion principles.  The Court of Appeal observed that PLCM Group, Inc. v. Drexler, 22 Cal.4^th 1084, 1096 (2000) [one of our Leading Cases] is a focal decision, with a trial court determining the value of attorney services based on considering factors such as the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.  Based on these factors, the lower court properly considered the litigiousness of the case and expertise of plaintiff’s counsel in arriving at the conclusion that requested fees were reasonable in nature.

            However, the Sixth District also had a tantalizing ending response to an argument that we have blogged on before.  In our June 8, 2008 post, we noted the split in judicial opinion about whether the time spent by opposing attorneys was probative in supporting the reasonableness of the value of services claimed by attorneys for the fee claimant.  In Reyes, the losing opponents argued that they only spent “roughly 65%” of the amount claimed by plaintiff’s attorney as a basis to disturb the lower court’s discretion.  The Sixth District was not impressed.  Its response, which mirrors what we have seen from some courts (but not all by a long shot), went along these lines:  “Defendants’ last point was also properly rejected.  The court explained in great detail why attorneys on opposite sides do not necessarily spend the same amount of time on a case.”  (Slip Opn., at p. 11.) 

So, we have a recent decision weighing against discovery of opponent’s fees in fee proceedings.  But, for those of you who do not like this reasoning, take heart—an unpublished Fifth District decision issued the same day dropped a footnote suggesting that it did not necessarily agree with its colleagues up North on the probative nature of opposition fee work.  Stay tuned on this blog very soon for this recent countervailing view on the issue. 

E-Discovery: California State And Federal Courts Will Award Attorney’s Fees As Sanctions For Hiding or Obstructing Electronic Document Discovery

Lombardo and Qualcomm Typlify Cases Sustaining Substantial Fee Awards in E-Discovery Disputes.

            About a year ago, LiveOffice, an on-demand messaging security provider, released these fascinating findings based on a nationwide survey:

·         53% of 400 IT managers and consumers admitted that they were not in position to meet federal court discovery requirements and 52% did not have an “e-discovery plan” prepared by legal counsel, despite the fact that 63% had been required to produce emails during the course of litigation;

·         28.9% of the responding managers/consumers were not even aware of federal procedural discovery obligations; and

·         Almost a third of the respondents were unable to produce any emails that were over one year old, likely due to document purging policies. 

Aside from the rather startling nature of these survey findings, failure to respond to e-discovery requests can result in awards of substantial attorney’s fees by the noncompliant litigants or, in some cases, sanctions of a professional nature against the litigants’ attorneys.  We survey two California cases, one at the state level and one from a federal venue, that illustrate how litigants and they attorneys can get stung with fee sanctions for not producing or destroying electronic documents requested during discovery.

            The first case, Lombardo v. Broadway Stores, Inc., 2002 WL 86810 (4^th Dist., Div. 3 Jan. 22, 2002) (unpublished), was decided by our local Santa Ana based appellate court, authored by Justice O’Leary on behalf of a 3-0 panel.  There, employee in an eventually certified class action sought accrued vacation benefits from defendant.  Defendant’s answer contained a payment defense, which made payroll records germane.  Named plaintiff sent “preservation” letters to Broadway early in the litigation.  Ms. Lombardo requested payroll records relating to vacation benefits.  What followed was sixth months of Broadway failing to produce the records.  Lombardo filed motions to compel, with Broadway responding that numerous electronic documents had been “lost, misplaced or destroyed.”  The court granted the motions and ordered Broadway to pay $3,479 in sanctions.  Lombardo filed motions to compel to obtain further responses when some partial documents were produced at a later mediation.  A referee recommended granting the motions and awarding Lombardo further sanctions of $8,396, a recommendation adopted by the trial court.  Broadway estimated there were about five million pages of manual documents that related to the class members’ payroll registers.  Under Code of Civil Procedure section 2023, Lombardo sought monetary sanctions for the computer payroll record spoliation, specifically requesting Broadway to pay the costs of recompiling the computer records from the 5 million hard copy records and to pay her $31,250 in attorney’s fees in seeking discovery compliance.  Broadway voluntarily agreed to convert the hard copy registers into electronic database records at a $100,000 conversion cost that it would bear.  Nevertheless, the discovery referee determined Broadway had willfully destroyed records after litigation began and in the wake of Lombardo’s prior requests.  The referee also found that Broadway gave evasive discovery responses knowing the records did not exist and frivolously opposed prior motions to compel.  The referee recommended that Broadway be ordered to recompile the records and pay the requested attorney’s fees sanction, a recommendation endorsed by then Judge Tully H. Seymour when he presided over class actions.

            Broadway appealed the eventual discovery order, which was affirmed on appeal (with costs on appeal also being awarded to Lombardo).

            The Lombardo court found authorization for the fee sanctions in Code of Civil Procedure sections 2023.030(a) (formerly section 2030(b)) [sanctions may be imposed against anyone engaging in conduct that is a misuse of the discovery process] and 2031.320(b) [monetary sanctions for failure to produce documents that are promised in a response].  The appellate panel also found that the general discovery misuse provision, section 2023.010 (formerly section 2023(a)) also allows for sanction impositions, with spoliation of evidence being sanctionable under the terms of current section 2023.010.  (See Cedars-Sinai Med. Center v. Superior Court, 18 Cal.4^th 1, 12 (1998).)  Further, because evidence had been destroyed, it would have been futile for Lombardo to proceed under section 2031 rather than moving under section 2023.

            Justice O’Leary then rejected Broadway’s main merits argument that sanctions were unjustified because hard copy payroll documents were still available (or, as it framed the argument, “were the same as the computerized data”).  “Not so,” said the appellate panel.  “The hard copy may have contained the same information, but that information was not equally accessible.  As Lombardo noted in her motion, it would be virtually impossible to manually extract all of the necessary and pertinent information from five million pages of records.”  After noting that a full recompilation would cost $5 million and Broadway was willing to spend $100,000 on an abbreviated recompilation, the Court of Appeal concluded that “[t]he computerized records had evidentiary unique value distinct from the hard copy records:  They made the information accessible.”  (2002 WL 86810 at *8.)  Justice O’Leary also found substantial evidence supported the referee’s determination that the destruction of records had been willful.  Finally, the $31,250 in sanctions was adequately documented, with Lombardo’s attorney providing his hourly rate and number of hours to substantiate the basis for the request.  (Id. at 10.)  (BLOG OBSERVATION—We find that this is generally how attorneys document their fee requests in law and motion proceedings, so it is nice to see appellate courts track the realities of practice in this area.) 

            Other California decisions are to the same effect.  See, e.g., Sherman v. Kinetics Concepts, 67 Cal.App.4^th 1152 (1998) [trial court denied imposing sanctions for concealment of documents discovered a week after trial; appellate court reversed, mandating an award of monetary sanctions to at least cover trial costs/attorney’s fees and consideration of additional sanctions short of a default entry under Code of Civil Procedure 2023].

            That brings us to the federal case on electronic discovery sanctions, a decision that gained widespread notoriety in short order.  In Qualcomm Inc. v. Broadcom Corp., 2008 WL 66932 (S.D. Cal. Jan. 7, 2008), Qualcomm sued for patent infringement, with Broadcom defending and counterclaiming based on waiver—factually based in Qualcomm’s participation in a Joint Video Team.  After asking Qualcomm for documents relating to JVT participation and receiving responses they would be produced (but nothing was), it was discovered during trial by Broadcom that Qualcomm failed to produce 21 emails showing JVT participation.  Subsequent investigation showed that Qualcomm did not produce over 46,000 responsive emails, producing instead 1.2 million pages of marginally relevant documents and failing to undertake a competent search for the omitted emails.  Once these documents came to light in trial, Qualcomm lost its infringement claims and Broadcom won based on its waiver defense.   District Judge Brewster found litigation misconduct by Qualcomm and its attorneys, adopting a magistrate’s recommendation that ordered Qualcomm to pay $8,568,633.25 in attorney’s fees and costs to Broadcom (all of its litigation expenses), including post-judgment interest that swelled the award to $9,259,985.09 through December 11, 2007.  Judge Brewster referred Broadcom’s sanction motion for further consideration by U.S. Magistrate Judge Barbara L. Major, who wrote a very comprehensive decision sustaining the $8.5 million Qualcomm sanction and referring several of Qualcomm’s attorneys to the California State Bar for an investigation of possible ethical violations.  (She allowed Qualcomm to pay Judge Brewster’s $8.5 million award, using any payments as a credit against her award in order to avoid “double dipping”.)

            Magistrate Judge Major found that the fee/costs sanctions against Qualcomm were fully justified under Federal Rules of Civil Procedure, rule 37(c)(1) [reasonable fees and costs may be imposed as sanctions where a party fails to unjustifiably amend a prior discovery response based on newfound information] and the inherent authority of the court to prevent abuse of the judicial process [see authorities cited at 2008 WL 66932 at *8].  There was no need for Broadcom to file a motion to compel, because Qualcomm earlier had indicated it would produce responsive JVT participation documents.

            With respect to Qualcomm’s litigation attorneys, the magistrate found that the retained attorneys did not look in the correct locations, likely accepted the assurances of an important client that Qualcomm’s search was sufficient, ignored warning signs that the client document search was inadequate, failed to press Qualcomm for the truth, and/or encouraged employees to only provide information that bolstered the non-participation argument.  This conduct warranted sanctions under Fed.R.Civ.P. 26(g) [all litigation counsel have a duty to act responsibly in the pretrial discovery process] and the inherent sanctioning power of the court [see Fink v. Gomez, 239 F.3d 989, 991 (9^th Cir. 2001)].  The magistrate found that Rule 37 alone did not help in this context, because it only sanctioned parties or only sanctioned attorneys if a motion to compel was filed/if there was noncompliance with a discovery order.  That is why other federal rules and inherent court authority anchors were relied on. 

            Magistrate Judge Major summed it up eloquently this way: “While no one can undo the misconduct in this case, this process, hopefully, will establish a baseline for other cases.  Perhaps it also will establish a turning point in what the Court perceives as a decline in and deterioration of civility, professionalism and ethical conduct in the litigation arena … If nothing else, it will provide a road map to assist counsel and corporate clients in complying with their ethical and discovery obligations and conducting the requisite ‘reasonable inquiry.’”  (2008 WL 66932 at *20.)

            Other federal courts have imposed substantial fee awards as sanctions where e-discovery has been thwarted.  See, e.g., Pennar Software Corp. v. Fortune 500 Sys. Ltd., 51 Fed.R.Serv.3d 279 (N.D.  Cal. 2001) [sanctions for fees and costs imposed against defendant for its failure to present a maintenance policy, a log file, or backup tapes that would track web site modification and e-document deletion procedures]; z4 Technologies v. Microsoft Corp., 2006 WL 2401099 (E.D. Tex. 2006) [in patent infringement case, plaintiff learned at deposition shortly before trial that Microsoft hid key email given to its attorneys a year before trial; trial judge ordered Microsoft to pay enhanced damages of $25 million plus $2 million in attorney’s fees to plaintiff for Microsoft’s failure to produce the key email during discovery and its failure to disclose the existence of a data base].  In some cases, dismissal of a lawsuit has occurred as an even more dramatic sanction in these types of situations.  See, e.g., Leon v. IDX Sys. Corp., 44 F.3d 951 (9^th Cir. 2006) [dismissal entered as sanctions where plaintiff ran hard drive “wiping” program on business laptop so as to erase 2,200 files].

            

            

            

Discovery Referee Orders--They Can't Be Issued Ex Parte and Cannot Order Litigant to Pay Referee Fees/Costs in Absence of Noticed Motion

Fourth District, Division Three Issues Mandate to Reverse Contrary Ex Parte Order.

            The Fourth District, Division Three, in Clayton v. Superior Court, Case No. G040482 (4^th Dist., Div. 3 June 27, 2008) (unpublished “by the court” decision), issued a writ of mandate overturning an ex parte order appointing a discovery referee pursuant to Code of Civil Procedure section 639(a)(5). 

            Clayton is significant in two respects.

            First, the appellate panel fundamentally found that discovery referees cannot be appointed on an ex parte basis.  Reason:  section 639(a)(5) requires appointment upon a written motion, which means notice and affording the other side an opportunity to be heard. 

            Second, the order requiring a litigant to bear all fees and costs of the referee is a “doubly important” reason for mandating a decision only after a noticed hearing occurs.   “Because the order imposes an up-front duty on petitioner to pay all fees and costs of the referee it clearly affects petitioner’s rights and its issuance on an ex parte basis deprives him of basic due process.”  (Slip Opn., at p. 3.)

CAN A PARTY SEEKING AN AWARD OF ATTORNEY’S FEES OBTAIN DISCOVERY OF ITS OPPONENT’S FEES IN ORDER TO REBUT A REASONABLENESS CHALLENGE?

We Survey the Decisions; They Leave Plenty Room for Advocacy On Each Side of the Debate.

        One of the most frequent challenges to fee petitions is reasonableness—the fees being sought were too large, involved attorneys assessing unduly high hourly rates, or were riddled by excessive and duplicative charges. Although we believe it is clear that discovery is allowable in fee motion proceedings, see Code Civ. Proc., sec. 2017.010 [“…any party may obtain discovery regarding any matter, not privileged, that is relevant to … the determination of any motion made in that action ….”], the question arises whether the moving party can obtain discovery of the fees and costs expended by an opponent in order to rebut any reasonableness challenge. As we show below, a conflict exists among federal authorities, although the few state decisions on the topic seems to support this type of discovery. This allows litigants substantial opportunity to argue the issue either way—and also allows counsel to “blow hot or old” depending on the position of his/her client.

        On the state level, the published appellate decisions have recognized the relevance of this type of inquiry, which by force of logic suggests that discovery would be allowable. See, e.g., Maughan v. Google Technology, 143 Cal.App.4th 1242, 1250-1251 2006) [appellate court observed that trial court consideration of an opponent’s fees in opposing anti-SLAPP motion was probative in deciding to reduce the successful moving party’s fee request]; Deane Gardenhomes Assn. v. Denktas, 13 Cal.App.4th 1394, 1399 (1993) [defendant homeowner prevailing in homeowner association action awarded fees based on the amount the association spent through trial]; West Coast Dev. v. Reed, 2 Cal.App.4th 693, 707 (1992) [noting the utility of comparing claimant and respondent fees when awarding fees]. Despite these authorities supporting discovery into what an opponent spent in fees, Mike Hensley has more frequently seen that trial judges grant protective orders against this sort of discovery, even when the claimant has agreed that privileged entries can be redacted or otherwise protected. Usually, the stated rationale is that the amount of fees spent by the defense involves different tasks and is not germane to the fee amounts that the plaintiff may need to spend. However, we also are aware of unpublished decisions where trial judges do grant substantial fee awards after observing that the other side must have spent at least what is being sought by the fee proponent.

        There is a split in opinion at the federal level, although more cases seem to support discovery in this area.

        Here are some of the “pro” federal cases: Chicago Professional Sports v. National Basketball Assoc., 1996 U.S. Dist. LEXIS 1525, 1526 (N.D. Ill. 1996); Blowers v. Lawyers Cooperative Publ’g, Inc., 526 F. Supp. 1324, 1327 (W.D.N.Y. 1981); Stastny v. Southern Bell Tel. & Tel. Co., 777 F.R.D. 662, 663 (W.D.N.C. 1978); Mitroff v. XOMOX Corp., 631 F. Supp. 25, 38 (S.D. Ohio 1985); Ruiz v. Estelle, 553 F. Supp. 567, 589 (S.D. Tex. 1982); Murray v. Stucky’s Inc., 153 F.R.D. 151, 152-153 (N.D. Iowa 1993); Coalition to Save Our Children v. State Bd. of Educ. of the State of Del., 143 F.R.D. 61, 64-66 (D. Del. 1992); Cohen v. Brown Univ., 1999 WL 695235 at *1, *6 (D.R.I. 1999); Grumman Corp. v. LTV Corp., 533 F. Supp. 1385, 1391 (E.D.N.Y. 1982).

        Here are some “anti” federal cases: Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1151 (9th Cir. 2001); Shaw v. AAA Engineering & Drafting, Inc., 213 F.3d 538, 543 (10th Cir. 2000); Norman v. Housing Auth. of City of Montgomery, 836 F.2d 1292, 1305 n. 3 (11th Cir. 1988); Johnson v. Univ. Col. of Univ. of Ala. in Birmingham, 706 F.2d 1205, 1208 (11th Cir. 1983). [STATE COURT NOTE—A Second District panel in Maughan, supra, 143 Cal.App.4th at 1250 n. 7, noted these cases but refused to follow them, as state appellate courts are entitled to do.]

        Given the diverse authority on both sides of the issue, there is plenty leeway for advocacy on each side of the proverbial coin as it relates to obtaining discovery of opponent work in order to rebut fee reasonableness objections.