CALIFORNIA ATTORNEY'S FEES

Judgment Enforcement: Appellate Court Affirms 40% Reduction of Fees Incurred On Remand Of Prior Appeal Allowing Recovery Of Bankruptcy Judgment Enforcement Efforts

 

$274,495 Request Properly Pared Down to $164,697.

     Pacelli v. Jaffe, Case No. B213228 (2d Dist., Div. 3 Jan. 9, 2012) (unpublished) is the culmination of a lot of fights involving post-judgment enforcement proceedings. After the appellate court remanded to allow the judgment creditor to recover for post-judgment enforcement efforts in the bankruptcy court under Code of Civil Procedure section 685.040, the lower court only awarded judgment creditor $164,697 out of a requested $274,495--almost a 40% reduction. The appellate court found no abuse of discretion in the reduction, and also chastised the appellants for making “counterproductive” attacks on the deciding judge’s character.

Judgment Enforcement: Costs And Attorney’s Fees Properly Allowed To Attorney Firm Judgment Creditor In Renewing Judgments Against Former Clients

 

Judgment Debtors’ Failure to Timely File Motions to Costs Was Expensive--Resulting in Affirmance of Renewal Costs/Fee of Almost $750,000

     As the “latest chapter of a 10-year saga,” judgment debtors (former clients) appealed a lower court’s grant of fees/costs to judgment creditor law firm in a total of sum of about $750,000 under postjudgment renewal statutes (Code of Civil Procedure sections 685.040 and 685.040). The problem here was that judgment debtors failed to file a motion to tax the requested costs within the 10 day deadline after the costs memoranda were served on judgment debtors. Judgment debtors appealed, but lost.

     The infirmity was that the 10-day deadline under section 685.070(c) is clear in nature and has no exceptions to it. (Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 146 (2010).)

     However, judgment debtors creatively argued that the costs could be challenged through a section 683.170 motion to vacate the renewed judgment. Although finding a “dearth of published cases construing section 683.170 and none deal with the issue currently before us,” the appellate court took solace in sister state judgment law, finding that none of the common defenses of sister state judgments fit within the section 683.170 challenge being advanced by judgment debtors. Besides, if judgment debtors were permitted to challenge costs under section 683.170 after forfeiting their right to do so under section 685.070(d), “section 685.070’s procedure for challenging costs would become meaningless.” (Slip Opn., p. 14.)

     Code of Civil Procedure section 473’s relief from forfeiture provisions did not aid judgment debtors, because the delay in seeking the relief appeared to be a tactical decision more than a mistake caused by inadvertence or excusable neglect.

     The decision affirming the renewed judgment fees/costs award is Keenan v. Webb & Carey, APC, Case No. D057430 (4th Dist., Div. 1 Aug. 16, 2011) (unpublished).

Judgment Enforcement: Attorney’s Fees Not Authorized For Prevailing In Independent Creditor’s Suit

Reversal of Fortune, With Appellate Court Reversing $1,492,643.71 Fees Award.

     In an interesting dispute over moneys contractually owed for home video distribution of the Steven Seagal movie “The Patriot,”

a judgment creditor won an independent creditor’s suit under Code of Civil Procedure section 708.210 et seq., with the lower court also awarding $1,492,643.71 in attorney’s fees to judgment creditor pursuant to section 701.020(c).

     The Second District, Division 1, in a 3-0 unanimous decision on the fees issue, reversed in Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc., Case No. B208839 (2d Dist., Div. 1 May 13, 2011) (certified for partial publication; fees award discussion published).

     Justice Chaney, writing for the reviewing court, found that no fees are authorized for recovery under the independent creditor’s suit scheme. The discretionary fee-shifting provision relied on by the trial court--section 701.020(c)--concerns procedures for enforcement of judgments by writs of execution, rather than use of the independent creditor’s suit procedure.

     Big reversal of fortune on the fee front for judgment creditor in this one.

Judgment Enforcement/Minors: Defense Costs From Minor Dismissing Case Should Not Be Imposed Against Guardian Ad Litem

Court of Appeal Issued Mandate Quashing Judgment Debtor Exam Proceeding Against Guardian.

     In Beasley v. Superior Court, Case No. D057308 (4th Dist., Div. 1 Dec. 10, 2010) (unpublished), a minor, through a grandmother who was appointed as guardian ad litem, had costs assessed against her in a case after it was voluntarily dismissed. The defense then sought to take a judgment debtor examination of guardian, personally, in order to see if there were assets to satisfy the $12,120.60 costs award.

     The Court of Appeal issued mandate, finding that the judgment debtor exam should be quashed. Reason? Guardian ad litem only serves in a representative capacity, and should not be liable for costs unless guardian was guilty of mismanagement or fraud--circumstances not even remotely in play.

Judgment Enforcement: Denial Of Fee Recovery For Post-Judgment Efforts, Including Fraudulent Conveyance Action Producing Return Of Property, Reversed And Remanded

Fourth District, Division 2 Finds No “Prevailing Party” Standard Applies in Post-Judgment Collection Efforts With Respect to Fee Recovery.

     In this category, we have examined several decisions dealing with statutes that allow for fee recovery, if certain conditions are met (with a judgment having to provide for fee recovery), under Code of Civil Procedure sections 685.040 and 685.080. Section 685.040 simply provides “[t]he judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment” including attorney’s fees “if the underlying judgment includes an award of attorney’s fees to the judgment creditor” pursuant to contract, statute or law, having no “prevailing party” language. The next unpublished decision, coming out of the Fourth District, Division 2, dealt with post-judgment collection efforts arising out of a prior anti-SLAPP win.

     Cochran v. City of Murrieta, Case No. E050649 (4th Dist., Div. 2 Nov. 30, 2010 unpublished) concerned a defendant who won anti-SLAPP fee recovery against certain plaintiffs, with defendant bringing a separate fraudulent conveyance action by which she obtained reconveyance of a piece of property from one losing plaintiff to plaintiff’s minor daughter (to provide a college fund, losing plaintiff said at a judgment debtor exam). Defendant then moved to recover additional attorney’s fees of $23,790, some in the pending case for post-judgment collection efforts and some incurred in the fraudulent conveyance action. The lower denied the requests for fees, basically expressly doubt that there was authority to award fees.  An appeal followed.

Judgment Enforcement: CCP § 685.040 Post-Judgment Enforcement Fees Not Applicable For Win in Priority Contest Between Two Judgment Creditors

Second District, Division 8 Finds Globalist Distinguishable in Priority Battle.

     In Globalist Internet Technologies v. Reda, 167 Cal.App.4th 1267 (2008), the Court of Appeal found that Code of Civil Procedure section 685.040 allowed attorney’s fees recovery to a judgment creditor in efforts pursuing collection of the judgment against judgment debtor. The next case involved a clash between judgment creditors, with the lower court refusing to award $72,807.79 in postjudgment costs (consisting mainly of $61,853.50 in fees) against the judgment debtor for judgment creditor’s successful litigation of the priority issue against another judgment creditor when it was clear that the judgment debtor had insufficient assets to satisfy both judgments. Winning judgment creditor appealed the denial of fees, arguing that Globalist should be extended to encompass priority disputes with respect to assessing section 685.040 fees against judgment debtor.

     Acting Presiding Justice Rubin, writing for a 3-0 panel of the Second District, Division 8, found that the lower court properly refused to extend Globalist to a priority battle between two judgment creditors. “Section 685.040 ensures that a recalcitrant judgment debtor does not reduce a creditor’s judgment to a hollow victory by forcing the creditor to eat up a judgment’s value with attorney fees trying to enforce the judgment. Extending section 685.040 to permit recovery of fees from the debtor for acts by third parties over whom the debtor has no control will not advance that purpose. Indeed, [winning judgment creditor’s] proposal risks imposing open-ended liability on judgment debtors such as respondents for events, such as [losing judgment creditor’s] intervention against [winning judgment creditor], beyond a judgment debtor’s control.”

     The decision is Slates v. Gorabi, Case No. B217067 (2d Dist., Div. 8 Nov. 5, 2010) (certified for publication).

Judgment Merger Of Fees Clause: Does Not Bar Fees Arising From Events Occurring After Entry of First Judgment

 

Second District, Division 6 Applies Exception to the General Rule.

     Generally, a judgment for damages under a contract replaces a defendant’s duty to perform the contract, which extinguishes any fee clause upon entry of judgment (except for postjudgment recovery of fees as specified under the CRC). (Jaffe v. Pacelli, 165 Cal.App.4^th 927, 934.) However, in Sudman v. Young, Case No. B217157 (2d Dist., Div. 6 June 22, 2010) (unpublished), the appellate court reminded us of an important exception: the merger is not a bar where a subsequent claim for fees is based on a different cause of action or facts occurring after entry of a prior judgment. (Allied Fire Protection v. Diede Construction, Inc., 127 Cal.App.4^th 150, 155 (2005).) The exception did apply in the facts before the panel, which led to affirmance of a $33,092.21 fee award in favor of the winning plaintiffs.

Interest on Attorney’s Fees Award: Interest Runs From Date of Fee Award, Not Earlier

Fourth District, Division 3 Agrees With Trial Court—“This Is An Easy One.”

     It is not that often that an appellate court agrees with a trial court’s assessment that “this is an easy one.” Well, you have that end result in the next case we review.

     In Golden Rain Foundation v. Lyon, Case No. G042358 (4^th Dist., Div. 3 May 20, 2010) (unpublished), defendant won an attorney’s fees award of $105,000 under the Davis-Stirling Act and private attorney general statute (out of more than $250,000 in requested fees). However, losing plaintiff got in a beef with defendant about when it had to pay interest on the fee award. Plaintiff paid interest on the fee award accruing from the date of the fee award, whereas defendant insisted upon an additional payment of interest running from the date of the underlying merits judgment. Finding this an “easy one,” the trial court found that plaintiff owed nothing more, with interest only accruing from the date of the fee award.

     Defendant appealed. The appellate court liked with the trial court’s analysis.

     Justice Ikola, writing on behalf of a 3-0 panel, agreed that the fee award was not certain until the trial court ruled on the motion. Hence, interest did not run until the date of the fee award. This result occurred both under Civil Code section 3287(a) (prejudgment interest liquidated statute) and Code of Civil Procedure section 685.020(a) (interest accrues on a separate judgment, with the fee award being a separate judgment).

     Easy as pie, the Court of Appeal ruled in affirming the case involving denial of more interest to the winning defendant on a “paid” fee award.

Judgment Enforcement: 10% Postjudgment Interest Runs From Date of Earlier Judgment, Even When Costs and Fee Awards Occurred Down The Line

 

Court of Appeal Construes Judgment By Its Terms and Per CCP § 685.020(a).

     So, here is one for all of you judgment enforcement addicts. (Are there such things? Some, we likely believe.)

     Commercial tenant did pretty well in a convoluted lease modification and rent renewal dispute, beating the claims of landlord as well as being awarded costs of $52,768.84 (the full monty) and fees of $1,798,105 (out of a requested $2.5 million).

     Losing landlord was less enthused, appealing in Pacific Pejiu Wu Restaurant Partners v. Haramis, Case Nos. A123117, A123918, & A124430 (1^st Dist., Div. 5 Apr. 2, 2010) (unpublished).

Judgment Enforcement: Judgment Debtor Entitled To Fees And Statutory Penalty Where Faxed Demand For Satisfaction Acknowledgment Was Received

Fourth District, Division 3 Found Fee Recovery Justified Even Though Satisfaction Demand Not Delivered Per Statute.

     Code of Civil Procedure section 724.050 provides the exclusive procedure for compelling an acknowledgment of satisfaction of judgment, requiring the party demanding the acknowledgment to deliver its demand with certain warnings either personally or by U.S. mail. A statutory penalty (section 724.050(e)) and mandatory attorney’s fees to the prevailing party (section 724.080) can be awarded in satisfaction demand disputes.

     So, what happens if the judgment debtor delivers the satisfaction demand by fax and it is actually received? Is the failure to strictly comply with statutory delivery requirements fatal to receiving the penalty and fees?

     No, said the Fourth District, Division 3 in Western Ethanol Co. v. Midwest Renewable Energy, Case No. G041841 (4^th Dist., Div. 3 Feb. 24, 2010) (unpublished), a 3-0 decision authored by Justice Bedsworth.

     The appellate court found that judgment creditor had actually received the satisfaction demand such that the fax delivery (versus personal or U.S. mail delivery) was not prejudicial in nature. There could be no confusion because section 724.050(c) provides that the 15-day deadline for satisfaction demand compliance runs from “actual receipt of the demand,” and judgment creditor did not deny that it received the demand. The Court of Appeal affirmed a lower court’s award of $7,400 in fees and $350 in penalties to the judgment debtor requesting the satisfaction acknowledgment (and all this over satisfaction of a principal judgment of $45,165.39).

     The decision also has a nice discussion of “accord and satisfaction” principles in the context of a potential future appeal and retention of an uncashed check by the judgment creditor for an unreasonable length of time.

     BLOG FAVORITE QUOTE—In discussing one of appellant’s technical arguments on appeal and an objection to the form (rather than substance) of respondent’s compliance, Justice Bedsworth summarized the challenge this way: “In effect, [appellant] is asserting [respondent] failed to say “Mother may I.’”

Post-Arbitration Fees and Judgment Enforcement: Court Of Appeal Considers Some Interesting Fee Award Appellate Challenges In These Two Areas

 

Sixth District Likes Trial Court’s Rulings Across the Board on Fee Issues.

     In Exatron, Inc. DiFrancesco, Case No. H033094 (6^th Dist. Dec. 9, 2009) (unpublished), plaintiff’s prior attorney’s fees and costs award from a contractual arbitration against defendant were affirmed in a prior appellate decision. Nine months later, plaintiff filed for supplemental fees and expenses of $105,919 to confirm the arbitration award, enforce the judgment, and defend the appeal. Ultimately, the trial court determined that plaintiff was only entitled to recover $42,195 in attorney’s fees incurred in enforcing the judgment (the confirmed arbitration award), denying in the process plaintiff’s Code of Civil Procedure section 473 mandatory and discretionary motions to allow the other supplemental fees and expenses.

     Both sides appealed; both sides lost.

Enforcement of Judgments: Judgment Debtors Beating Judgment Creditor Claims In Interpleader Entitled To Awards Of Costs As Prevailing Party

 

Judgment Creditor Also Not Entitled to Prevailing Party Fees Under Judgment Enforcement Statute Even Though No Net Monetary Recovery Gained Under the Statute.

     Here is a fairly arcane decision for you practitioners that are judgment enforcement specialists, affirming an award of costs to judgment debtors and denying judgment creditor’s appeal that he was entitled to fee because no net monetary recovery was awarded under a specific judgment enforcement statute with prevailing party language.

     Commonwealth Land Title Co. v. Zocca, Case Nos. A120397 & A122294 (1^st Dist., Div. 1 Oct. 15, 2009) (unpublished) involved a longstanding feud been one brother against another brother and sister-in-law arising out of a $11,800 judgment obtained by bro 1 (judgment creditor) against bro 2/sis-in-law (judgment debtors). Because lots of interest had accrued on the judgment and the judgment debtors wanted to refinance a house, a title company filed an interpleader action to determine everyone’s rights and get itself out of the fracas. That was not the end of things, because judgment debtors filed a tort action based on their view that judgment creditor was demanding an excessive payoff amount in return for release of his judgment lien on the house. Eventually, judgment debtors obtained a summary adjudication ruling that the judgment lien had expired (because it was time barred). The tort claim was dismissed, was appealed, and was reversed and sent back with directions to see if judgment debtors could proceed with a statutory claim under Code of Civil Procedure section 724.070, which allows a judgment debtor to collect actual damages or $250 (whichever is greater) for an intentional excessive payoff demand by a judgment creditor. Following yet another appeal, a jury returned a verdict finding an intentionally excessive payoff by judgment creditor but also found judgment debtors did not suffer any damages. The trial court determined that (1) judgment debtors were entitled to the interpled funds based on the expiration of the judgment lien; (2) judgment debtors were each entitled to the minimum $250 statutory damage award under section 724.070, but no net damages were awardable because of offsetting amounts owed to judgment creditor under the expired judgment; (3) judgment debtors were the prevailing parties for a routine costs award; and (4) no one prevailed for purposes of fees under CCP section 724.080 (which allows fees to a prevailing party in an intentional excessive payoff case).

     If you are already significantly confused (although we are not), judgment debtors were apparently okay with the result but not judgment creditor—who appealed many, many rulings (including the prevailing party costs and fees issues).

Family Law/Foreign Judgment Enforcement: British “Maintenance” Award Of Attorney’s Fees Was “Support” Award That Could Not Be Enforced Under Uniform Foreign Money-Judgments Recognition Act

Third District Reverses Trial Court Recognition of Fee Award from Britain.

     In the next one, Brits might think that we pesky U.S. rebels just have it in for them. Not quite, it simply was a technical interpretation of what awards can and cannot be enforced under the Uniform Foreign Money-Judgments Recognition Act, Civil Code sections 1713 et seq., which governs enforcement of foreign judgments in California (and most U.S.) courts.

     In re Marriage of Lyustiger, Case No. C057861 (3d Dist. Sept. 29, 2008) (certified for publication) decided that a British “maintenance” award of 50,000 pounds for wife’s attorney’s fees was a “support” award that could not be enforced under the Uniform Act. (See Civ. Code, former sec. 1713.1(2), pre-2007 amendments, because the subject action was commenced in 2006.) The award of attorney’s fees, under the British award, was broad enough to be encompassed within the “support” prohibition. The trial court did enforce the British award in Yolo County Superior Court, a determination which was reversed by the Third District. [NOTE—2005 amendments to the Uniform Act, which were not applicable, do not seem to alter the “support” exception to enforcement.]

Judgments: Court Of Appeal Affirms Refusal To Enforce Judgment Against Attorney Where Attorney Legitimately Performed Services And Was Paid Fees Before Imposition of Constructive Trust Against Client’s Property

Third District Finds No Basis to Make Attorney Liable for Judgment Against Client.

     In Monier-Kilgore v. Flores, Case No. C054502 (3d Dist. June 30, 2009) (unpublished), an attorney was paid about $532,000 in fees after helping his clients collect insurance proceeds from two recalcitrant insurers (receiving his contingency portion) and defending clients against plaintiffs’ action (on an hourly basis). Attorney was paid by July 2006, and plaintiffs later obtained entry of a damages/constructive trust judgment against attorney’s clients. Plaintiffs then attempted to enforce the judgment against attorney, a request denied by both the trial and appellate courts.

Judgment Enforcement: Judgment Creditor Could Not Gain Fee Recovery Against Subsequent Fraudulent Transferee Who Was A Party to Original Judgment

Judgment Creditor’s Use of Clerk Default Fee Schedule Did Not Give Basis to Deny Fee Award, But Other Bases Did.

     Under our category “Judgment Enforcement,” we previously have discussed the operation of Code of Civil Procedure section 685.040, which provides that attorney’s fees incurred in enforcing a judgment are recoverable as an element of costs if the judgment included a fee award to the judgment creditor. This provision was again involved in the next unpublished opinion that we examine.

     Resnik v. Roberts, Case No. D050656 (4^th Dist., Div. 1 June 24, 2009 ) (unpublished) involved a situation where judgment creditor with a default judgment tried to enforce it against an alleged fraudulent transferee of assets from the original judgment debtor. Judgment creditor prevailed and also sought to recover $261,948 in attorney’s fees incurred in the second action because the original judgment had a fees clause against judgment debtor. The trial court denied the fee request, principally on the ground that judgment creditor sought fees under local court rules for clerk default prove-ups rather than pursuant to an independent court default prove-up. Judgment creditor was miffed, appealing the fee denial ruling.

Enforcement of Costs/Fee Awards: Trial Court Still Has Discretion To Order An Undertaking For Postjudgment Costs/Fee Order Even Where Defendants Paid Off Prior Damages Judgment

First District, Division 1 Grants Writ of Mandate Because Trial Court Failed to Exercise Any Discretion on Undertaking for Substantial Cost/Fees Order.

     This post is somewhat complimentary to our June 12, 2009 post on Tracy v. Tracy, where a reversal and remand was required because a trial court failed to actually exercise its discretion based on a legal misreading of a judgment. Here, a similar situation arose in a post-judgment undertaking motion, where an aggrieved plaintiff filed a writ of mandate to remedy a perceived lower court error. Plaintiff was right to do so.

     W. Wong Construction Co., Inc. v. Superior Court, Case No. A124013 (1^st Dist., Div. 1 June 11, 2009) (unpublished) concerned a business plaintiff which won a $131,338.57 damages judgment, which they appealed but paid off. Later, the trial court awarded plaintiff costs in the amount of $28,672.56 and attorney’s fees in the amount of $370,955.20, determinations separately appealed. (BLOG OBSERVATION—Defendants prudently separately appealed the subsequent costs/fee order, a practice we have recommended many times in our category “Appealability.” The appellate panel did indicate that no separate appeal was necessary in this situation because the damages judgment did indicate that plaintiff was the prevailing party for costs and fees, which means the appeal of the first damages order subsumed the later order under Grant v. List & Lathrop, 2 Cal.App.4^th 993, 998 (1992) and later cases such as Amwest Surety Ins. Co. v. Patriot Homes, Inc., 135 Cal.App.4^th 82, 84 (2005). However, the Court of Appeal did agree with us, observing “[t]he normal practice, however, is to appeal both the judgment and the subsequent award” and citing in support Torres v. City of San Diego, 154 Cal.App.4^th 214, 222 (2007).)

Post-Judgment Enforcement Undertakings: No Attorney’s Fee Entitlement In Governing California Statute

Second District, Division 6 Considers Scope of CCP Section 720.260.

     Code of Civil Procedure section 720.260(c) allows a creditor with a competing claim to prevent release of funds to a secured party or lienholder claiming priority by posting an undertaking in favor of secured party/lienholder to “[i]ndemnify the secured party or lienholder against any loss, liability, damages, costs, and attorney’s fees, incurred by reason of the enforcement proceedings.” The next case explored whether this meant that the winning lienholder also obtains entitlement to fees in the subsequent action on the undertaking in which lienholder prevailed.

Post-Judgment Enforcement: Supplemental Costs Memorandum Seeking Fees Must Be Served Upon Judgment Debtor

Second District, Division 1 Reverses Supplemental Fee Award Based Upon Lack of Notice.

     Under Code of Civil Procedure section 685.040, a judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Recoverable costs include attorney’s fees incurred in enforcing a judgment, where the original judgment includes a fee award pursuant to a contractual fees provision. The judgment creditor can seek recovery of those enforcement fees by filing either a costs memorandum under section 685.070(b) or a noticed motion under section 685.080(a). Judgment creditor (an attorney) doggedly pursued judgment debtor (ex-client) for supplemental fees on a default judgment for a 4-year enforcement period by filing an application for supplemental fees (deemed to be the equivalent of a costs memorandum) without notice to the judgment debtor. The simple question for the Court of Appeal: was the application valid without notice to the debtor?

Mixed Result In Decade Long Litigation: Substantial Attorney’s Fees Award Goes “Poof” When Plaintiff Should Have Been Given Leave To Amend, But Plaintiff Denied Post-Judgment Enforcement Fees

Second District, Division 7 Publishes Decision in Decade Long Battle Arising From Credit Impairment Allegations.

     Although too long to recite in detail (43 pages in length), Sanai v. Saltz, Case Nos. B198217 & B202787 (2d Dist., Div. 7 Jan. 26, 2009) (certified for publication) chronicles a donnybrook between a former in pro per renter (a transactional lawyer who learned litigation along the way), credit-reporting service, and landlord over a credit reporting dispute arising out of claimed unpaid rent under $5,000. (Yes, you heard that right.) The case demonstrates the “poof” principle and reinforces that a judgment must award fees in order for the judgment creditor to obtain post-enforcement attorney’s fees by statute.

      Click it up; here are the facts.

Judgment Enforcement: Contractual Fees Clause Not Trumped By Bankruptcy

Second District Remands For Fee Determination in Split Opinion.

     Under our category “Judgment Enforcement,” we have discussed prior cases construing Code of Civil Procedure section 685.040, which allows a judgment creditor to recover reasonable and necessary attorney’s fees incurred in “enforcing” a judgment if the underlying judgment includes an award of fees to the judgment creditor. The Second District, as 2008 drew to an end, has now considered this anew in a familiar setting—bankruptcy proceedings that intertwine with state court litigation—but with a divergence in opinion as to the proper result.

Enforcement Of Foreign Judgment Awarding Attorney’s Fees Against Plaintiff’s Attorney Upheld By Second District, Division Eight

Substantial Judgment Awarding Fees Found to be Nonpenal in Nature and Nonrepugnant to State Policy.

     This post examines an appeal raising challenges to substantial fee awards against a litigant’s attorney (a nonparty) by the Gibraltar Supreme Court, akin to a California superior court, under English law. After the Los Angeles County Superior Court entered a California judgment of $3,159,758.50 based on the Gibraltar judgments, attorney appealed, arguing that each judgment was either a penalty or repugnant to California state policy so as to not be deserving of enforcement under the Uniform Foreign Money-Judgments Recognition Act (UFMJRA), a prior version of Code of Civil Procedure section 1713 et seq. existing before 2007 amendments.

     The Gibraltar judgment, as converted to a California judgment, was upheld on a comity basis in Java Oil Ltd. v. Sullivan, Case No. B195862 (2d Dist., Div. 8 Dec. 2, 2008) (certified for partial publication).

     Aggrieved attorney got to this point by assisting a Mr. Laycock in bringing an action against two defendants for an alleged construction injury that was ultimately dismissed after the Gibraltar court found evidence the claims were fraudulent in nature. Defendants then brought actions against attorney, with the Gibraltar court finding he was complicit with Laycock in the fraudulent litigation. Eventually, two judgments were entered against attorney by the Registrar: the first for 621,958.75 pounds, representing the costs defendant incurred in defending against Laycock’s claims, and the second for 1,154,025 pounds, consisting of the fees/costs incurred in defendants’ prosecution of their claims against attorney personally. Prior to the hearing on the claims against attorney, he tried to seek Chapter 13 bankruptcy protection, but the bankruptcy judge found it to be bad faith filing after attorney failed to list income and the substantial claims pending in Gibraltar. The Los Angeles County Superior Court entered judgment against attorney for $3,159,758.50, giving complete comity to the Gibraltar awards.

     Attorney’s primary challenges on appeal—that the Gibraltar judgments were tantamount to penalties or were repugnant to California public policy—did not prevail.

Penalty Challenge

     Even though a penalty judgment is excluded from UFMJRA enforceability, the Court of Appeal found that it had to be penal in purpose, with cases and the Restatement of the Law, The Foreign Relations Law of the United States consistently finding that a fee award was not penal. The fee award implicated no penal law of Gibraltar, and no payment of money was ordered to a governmental entity. The fee award was not a penalty. (Accord, Erbe Elektromedizin GMBH v. Canady, 545 F.Supp.2d 491, 496 (W.D.Pa. 2008).)

Public Policy Repugnancy

     This argument pivoted around the premise that the Gibraltar awards—anchored in English law—violated the American Rule on attorney’s fees award where each side bears its own fees in the absence of a countervailing contract or statute. The appellate court did not find persuasive that the English Rule, where the loser must pay the winner’s attorney’s fees, is totally repugnant to a different policy that is not antithetical to some basic American moralist prohibition (especially given the findings by the Gibraltar court about fraudulent activity). With respect to the defense fees awarded against the attorney, this was found akin to attorney’s fees routinely awarded as damages in malicious prosecution cases. (See Bertero v. National General Corp., 13 Cal.3d 43, 59 (1974).) The fee award against attorney based on the defendants’ expenses in prosecuting their fraud action in Gibraltar were not repugnant to California policy given the determinations that attorney was complicit in the fraudulent litigation and had actually helped prepare false documents. Furthermore, there was case law establishing that a subsequent fee award after a prior judgment under English law should be given comity, even where United States law was different in the same context. (See Somportex Ltd. v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 441-443 (3d Cir. 1971).)

     BLOG OBSERVATION—This case has an interesting discussion of the different philosophical underpinnings for the English versus American Rule for attorney’s fees awards. The American Rule is based on the democratic ideal that all citizens should have unfettered access to the courts, idealism obviously not shared by our counterparts in Great Britain. (See Mihalik v. Pro Arts, Inc., 851 F.2d 790, 793-794 (6^th 1988).)

Judgment Creditor Fee Awards: You Must Have A Fee Award In the Underlying Judgment To Collect Further Fees Under CCP Section 685.404

First District, Division Five Implicitly Agrees With Second District’s Globalist Decision.

     In our post of October 28, 2008, we reviewed the Fourth District, Division Three’s decision in Globalist Internet Technologies, Inc. v. Reda, 167 Cal.App.4^th 1267 (2008), where the appellate court ruled that fees incurred in the defense of a related settlement enforcement proceedings were recoverable under Code of Civil Procedure section 685.040—a statute allowing a judgment creditor to recover “[a]ttorney’s fees incurred in enforcing a judgment” but only if “the underlying judgment includes an award of attorney’s fees to the judgment creditor ….” In Globalist, the underlying judgment did include an award of fees, so that one of the necessary prerequisites of section 685.040 was met for purposes of awarding substantial fees incurred in the related proceedings.

     However, a different situation was presented in a recent unpublished First District, Division Five decision. Lien v. Lucky United Properties Investments, Inc., Case Nos. A118698 & A120068 (1^st Dist., Div. 5 Nov. 26, 2008) (unpublished) involved a trial court order awarding fees to obtain a prior judgment, an order which was reversed on appeal by the First District. Thus, at the time of review of the orders at issue in the recent unpublished decision, there was no fee award in the underlying judgment such that the lower court did not err in declining to award fees. (Cf. Imperial Bank v. Pim Electric, Inc., 33 Cal.App.4^th 540, 558 (1995).)

     BLOG UNDERVIEW—For another recent case involving section 685.040, see Jaffe v. Pacelli, 165 Cal.App.4^th 927 (2008), discussed in Globalist and in our August 2, 2008 post.

CCP Section 685.040: Fees Are Awardable In Separate Action Successfully Defended By Judgment Creditor To Avoid Reduction of Original Judgment By A Five-Sixths Margin

Fourth District, Division Three Relies on Jaffe v. Pacelli In Reversing Denial of Fee Award to Judgment Creditor.

     In our August 2, 2008 post, we reviewed the Second District’s decision in Jaffe v. Pacelli, 165 Cal.App.4^th 927 (2008), which dealt with application of Code of Civil Procedure section 685.040. That provision specifies that when a judgment awards attorney’s fees pursuant to a contract, the postjudgment attorney’s fees incurred by the judgment creditor in “enforcing” the judgment are included as recoverable costs. Jaffe determined that section 685.040 allowed a judgment creditor to recover fees expended in successfully prosecuting a bankruptcy adversary proceeding that ultimately resulted in getting the bankruptcy petition dismissed. The Second District reasoned that the bankruptcy would have discharged the judgment in entirety had the judgment creditor not prevailed, such that the forum in which qualifying fees were expended was not the determinative factor. (Id. at 934, 936, 938.)

     Justice O’Leary, of our local Fourth District, Division Three, recently authored an opinion on behalf of our local appellate court in a matter than confronted Jaffe, albeit in the context of a separate state court action by which judgment debtor sought to enforce a handwritten mediation stipulation that would have reduced judgment creditor’s judgment by 5/6ths of what was owed. Her opinion interpreted section 685.040 much like the Second District did in Jaffe, which she found “on point” in the cause before the 4/3 panel.

     Globalist Internet Technologies, Inc. v. Reda, Case No. G039795 (4^th Dist., Div. 3 Oct. 28, 2008) (certified for publication) involved a convoluted set of facts which we will try to parse to their essentials.

     Judgment creditor obtained a compensatory judgment against several judgment debtors, as well as attorney’s fees of $88,972 (as authorized by contract) that were included in the judgment. While appeals of the judgment and a related malicious prosecution anti-SLAPP motion were pending, plaintiff filed a separate Los Angeles Superior Court action against one of the judgment debtor’s business associates. The litigants engaged in global mediation, a process that resulted in a handwritten stipulation for settlement outlining the terms of a global resolution. However, “because the devil is in the details,” negotiations over a final settlement agreement broke down and no final agreement was ever signed. Judgment debtors then went for broke, filing several proceedings to enforce the handwritten settlement stipulation, including a separate settlement enforcement action in Orange County Superior Court (OCSC). Judgment debtors were no fools, because the handwritten stipulation—if effective—would have resolved the matter for one-sixth of what was owed under the original judgment (if certain other performance terms were satisfied). The parties stipulated that the global mediator could arbitrate the separate settlement OCSC action, resulting in a determination that the handwritten stipulation was not an enforceable settlement agreement—a ruling confirmed by the superior court and affirmed by the Fourth District, Division Three upon review in a related earlier appeal.

     Judgment creditor then filed a costs memorandum seeking $134,032.67 in attorney’s fees under section 685.040, $107,561 of which were incurred in defending against the separate settlement OCSC enforcement action. Impacted judgment debtors moved to tax costs, with the trial court agreeing that the costs in defending the separate action were not incurred in enforcing the original judgment.

     Judgment creditor appealed and won; our local Santa Ana appellate court reversed the fee denial order and remanded for a fee determination in judgment creditor’s favor.

     Because the case involved an interpretation about the breadth of section 685.040, the review standard was de novo.

     From a “bottom line” viewpoint, Justice O’Leary determined that it was incorrect to conclude that section 685.040 did not allow recovery of attorney’s fees incurred in a different action, especially given that Jaffe made it clear that this was not the case. The appellate panel also found corroboration in a literal construction of the statute: “The plain meaning of the word [‘enforcing’ in section 685.040] necessarily suggests ‘enforcing a judgment’ would include defending the validity of the judgment against challenge in a separately filed attack.” (Slip Opn., at p. 8.)

     Also, the equities favored the result reached in Globalist Internet. “As in Jaffe, [judgment creditor’s] right to recover attorney fees does not depend on the nature of the action or the forum in which the expenses were incurred …. By the time [the separate OCSC settlement enforcement action] was filed, [judgment debtors] owed [judgment creditor] over $444,600 (not including accrued interest) on this judgment. Their action sought specific performance of an alleged settlement of the judgment for $75,000 or about one-sixth of what was owed. Had [judgment creditor] not defended against the specific performance action, it would have lost substantial rights under the judgment in this case. Accordingly, the attorney fees it incurred in defense of the companion action were incurred in enforcing the judgment.” (Slip Opn., at pp. 10-11.)

     The Court of Appeal remanded to the trial court for purposes of fixing an appropriate fee award to judgment creditor, including consideration of whether judgment creditor was entitled to all fees incurred in the defense of the separate OCSC settlement enforcement action. Beyond that, judgment creditor was awarded costs on appeal, another potential source of fee recovery once the remittitur issues in this appellate case.

Sixth District Decides That Judgment Creditor Is Entitled to Enforce Subsequent Attorney's Fees/Cost Order Through A Writ of Execution Even Though Creditor Satisfied Underlying Judgment During Pendency Of Fees/Costs Motion

Any Other Result Would "Undermine the Intent" of the Judgment Enforcement Statutes.

            In a case that most law professors would love (replete with convoluted facts), the Sixth District faced an appeal by a judgment creditor arising from a 2000 judgment in judgment creditor's favor that included an attorney's fees award of $22,566.92.  No matter how this tale ends, judgment debtor is going to pay a lot more than the initial fee award, again giving reinforcement to our Mission Statement about fees being the tail that wags the litigation dog (with apologies to Mike Hensley's Labrador retriever Riffle).

Judgment debtor failed to satisfy the judgment such that post-judgment fees and costs kept mounting.  Skirmishes and appeals ensued over amounts that judgment creditor sought to add to the 2000 judgment.  By July 2005, judgment creditors obtained a writ of execution in the amount of $82,848.31, with more costs memoranda and motions to tax costs being filed by the two sides.  In January 2006, judgment creditor filed an attorney's fees motion in which she sought $70,152.63 in the supporting memorandum and her attorney requested $70,156.63 in his supporting declaration.  Before the motion could be heard, judgment debtor had refinanced a house and satisfied the outstanding writ of execution by paying the sheriff a total of $87,326.29—undisputably satisfying the judgment, but not dealing with the outstanding fee request.  The trial court subsequently granted the attorney's fees request, but specified no amount, although later augmenting the 2000 judgment by $70,156.63.  Later, in June 2006, judgment creditor sought another $22,170 in fees from February 2006 to June 2006.  However, judgment creditor failed to clearly create a record of what happened on this request.  Meanwhile, in April 2007, the Sixth District ruled in one of the many appeals that the 2000 judgment had been satisfied such that the 2006 fee augmentation could not be added to that judgment, although expressing no opinion on the results of the trial court decision to award $70,156.63 in fees to judgment creditor.  In August 2007, judgment creditor filed a motion to clarify the state of affairs—claiming the $70,156.63 in fees (through February 2006), $22,170 in more fees (for February 2006 to June 2006), and $59,087.68 in yet more fees (for post-judgment efforts between June 2006 through March 2007).  After a rash of more opposition and reply paperwork, the trial court ultimately denied the August 2007 motion brought by judgment creditor and refused to issue a writ of execution, finding the April 2007 appellate opinion foreclosed adding more fees to the satisfied 2000 judgment.  Judgment creditor appealed.

The Sixth District, in Anderson v. Kellogg, Case No. H032462 (6^th Dist. Aug. 28, 2008) (unpublished)—written on behalf of a 3-0 panel by Justice Bamattre-Manoukian—reversed and remanded after sifting through the Enforcement of Judgments Law, Code of Civil Procedure sections 680.010 through 724.260, to focus on the germane provisions.  Here is a distillation of the results of the appellate court's decision:

·      The Sixth District's April 2007 prior decision was not meant to preclude ultimate enforcement of subsequent post-judgment enforcement efforts occurring after satisfaction of the 2000 judgment, including the March 2006 attorney's fees order;

·      The March 2006 award of attorney's fees could be enforced through a writ of execution as long as the monetary amount can be definitely ascertained (see sections 680.230, 680.270, 699.510(a), 699.520(e); Newland v. Superior Court, 40 Cal.App.4^th 608, 615 (1995); Alioto Fish Co. v. Alioto, 27 Cal.App.4^th 1669, 1687 (1994));

·      The March 2006 fee order could be executed upon despite the prior satisfaction of the 2000 judgment; "[t]o conclude otherwise would allow a judgment debtor to resist full payment of judgment for a period of time and force the judgment creditor to bear the costs of enforcement so long as the judgment is satisfied before disposition of the judgment creditor's pending motion for enforcement costs.  This result would undermine the intent of the statutes to reimburse the judgment creditor for costs necessarily incurred in enforcing the judgment, where the costs are neither excessive nor untimely claimed" (Slip Opn., at p. 18);

·      A remand was necessary for judgment creditor to prove that she had a definitely ascertainable sum of money owed for fees that should be the subject of a writ of execution;

·      Judgment creditor failed to create an adequate record—including an unsigned order—to demonstrate error in denying enforcement of costs between February to June 2006;

·      A judgment creditor claiming costs and fees in enforcing a judgment must file a noticed motion for same not later than two years after the costs have been incurred and before satisfaction of judgment in full (section 685.080(a)), such that judgment creditor on remand was limited to showing whether she had a definitely ascertainable amount to support issuance of a writ of execution to enforce the March 2006 fee order of $70,156.63.  Judgment creditor's post-June 2006 efforts were doomed because they were untimely requests that related to the 2000 judgment—she could not "relate back" to capture untimely post-judgment collection efforts.

Here, the bottom line is that judgment debtor paid $65,000 more already for a fee request ignored years back, and may face another $70,000-plus in exposure on remand.  However, Anderson is a good case in establishing that a judgment creditor usually will not be derailed in pursuing collection of pending fee requests through a last-minute judgment satisfaction.