CALIFORNIA ATTORNEY'S FEES

Year In Review – 2018

Year End Wrap-Up: Mike & Marc’s Top 25 Decisions In 2018

Part 2 of 2—Employment Issues, Lender Trust Deed Fee Clauses, Fees As Damages, Section 998, And Sanctions Dominated The Second Batch Of Our Top 25.

            In line with our prior post on some of the Top 25 decisions, we now round out with the 12 additional decisions. If other decisions come out after this post that are significant, we will include them in the 2019 top cases. Happy Holidays to our readers!

12. EMPLOYMENT – Nishiki v. Danko Meredith P.C., 25 Cal.App.5^th 883 (1^st Dist., Div. 4 Aug. 1, 2018) – authored by Justice Schulman; discussed in our Aug. 3, 2018 post: Employer is liable for significant employee fees of $86,160 under Labor Code section 98.2(c) even though only $4,250 in waiting time penalties awarded by Labor Commissioner and superior court after Berman hearing. (California Supreme Court denied review on Nov. 14, 2018.)

11. EMPLOYMENT – Atempa v. Pedrazzani, 27 Cal.App.5^th 809 (4^th Dist., Div. 1 Sept. 28, 2018) – authored by Justice Irion; discussed in our Sept. 30, 2018 post: Individual officer/agent of corporate employer can be held liable for attorney’s fees under PAGA (Labor Code § 2699(g)) for certain wage/hour violations. (Petition for review filed and pending as of Nov. 7, 2018 with the California Supreme Court.)

10. DEEDS OF TRUST – Chacker v. JPMorgan Chase Bank, N.A., 27 Cal.App.5^th 751 (2d Dist., Div. 5 Sept. 19, 2018) – authored by Justice Baker; discussed in our Sept. 20, 2018 post and Hart v. Clear Recon Corp., 27 Cal.App.5^th 322 (2d Dist., Div. 8 Sept. 18, 2018) – authored by Justice Rubin; discussed in our Sept. 19, 2018 post: Narrow deed of trust provisions only allowed recovery of fees incurred by lender which could be added to loan amounts due by borrowers, but these provisions did not allow for independent fee award over the deed of trust limitations.

9. DAMAGES/SUBSTANTIATION OF REASONABLENESS OF FEES – Copenbarger v. Morris Cerullo World Evangelism, Inc., 29 Cal.App.5^th 1 (4^th Dist., Div. 3 Nov. 13, 2018) – authored by Justice Fybel and discussed in our Oct. 20, 2018 post and Nov. 13, 2018 post: Attorney’s fees sought as damages for a contractual breach had to be proven at trial through admissible evidence, with presentation of client’s testimony alone not able to competently show verification or reasonableness of counsel’s work, reversing trial court’s admission of client’s testimony and overturning the judgment as a matter of law.

8. SECTION 998 – Martinez v. Eatlite One, Inc., 27 Cal.App.5^th 1181 (4^th Dist., Div. 3 Oct. 3, 2018) – authored by Justice Ikola and discussed in our Oct. 3, 2018 post: Although calling for legislative clarification of the statute, section 998 requires a trial court to compare the jury’s verdict plus plaintiff’s pre-offer fees/costs against the amount of the 998 offer plus plaintiff’s pre-offer fees/costs in determining whether plaintiff received a more favorable judgment for fees/costs shifting purposes.

7. SANCTIONS -- Huerta v. Kava Holdings, Inc., 29 Cal.App.5^th 74 (2d Dist., Div. 8) – authored by Orange County Superior Court Judge Kim Dunning (sitting by assignment) and discussed in our Nov. 17, 2018 post: Panel followed Agave v. Merrill Lynch, Pierce, Fenner & Smith, 18 Cal.App.5th 1098 (2018) [#22 of our Top 25 Cases for 2018] in deciding that FEHA plaintiffs in pre-2019 cases do not face costs/fees exposure where a CCP § 998 offer was involved unless the case filing/prosecution is found to be frivolous in nature, finding a legislative amendment effective January 1, 2019 to be persuasive with respect to its conclusion.

6. COSTS/EMPLOYMENT – Quiles v. Parent, 28 Cal.App.5^th 100 (4th Dist., Div. 3 Nov. 2, 2018) – authored by Justice Fybel and discussed in our Nov. 6, 2018 post: In a Federal Labor Standards Act (FLSA) action, plaintiff was entitled to recovery of certain routine costs under the federal statute even though not recoverable under state law costs provisions when plaintiff prevailed on FLSA claims.

5. TAXATION – Land Partners, LLC v. County of Orange, 19 Cal.App.5^th 741 (4^th Dist., Div. 3 Jan. 22, 2018) – authored by Justice Ikola and discussed in our Jan. 16, 2018 post and Jan. 24, 2018 post: Losing County tax assessor is not subject to Revenue and Taxation Code § 5152 fee exposure in taxpayer refund action where assessor only wrongly applied the law.

4. ARBITRATION/COSTS – EHM Productions, Inc. v. Starline Tours of Hollywood, Inc., 21 Cal.App.5^th 1058 (2d Dist., Div. 2 Mar. 28, 2018) – authored by Justice Chavez and discussed in our Mar. 30, 2018 post: Incremental costs award process used during the course of an arbitration, after a JAMS appellate panel confirmed the merits award, did not violate the one judgment rule, waiver, or estoppel principles.

3. SECTION 998 – Meleski v. Estate of Hotlen, 2018 WL 6241504 (3d Dist. Nov. 29, 2018) – authored by Acting Presiding Justice Blease and discussed in our Dec. 6, 2018 post: Non-named insurance carrier is liable for CCP § 998 costs after rejecting 998 offer on behalf of its insured when the insured did not do better than the 998 offer after a jury trial.

2. INTELLECTUAL PROPERTY/PREVAILING PARTY – Close v. Sotheby’s, Inc., No. 16-56234 (9^th Cir. Dec. 3, 2018) – per curiam order and discussed in our Dec. 4, 2018 post: Defendants prevailing on attorney’s fees compensable-California Resale Royalties Act claims based on preemption grounds, despite existence of non-compensable, remaining “sliver” claims, were prevailing parties under the fee-shifting provision despite the existence of some residual claims for purposes of applying for appellate fees.

1. SANCTIONS -- CPF Vaseo Associates, LLC v. Gray, 2018 WL 6380742 (4^th Dist., Div. 1 Dec. 6, 2018) – authored by Justice Dato and discussed in our Dec. 6, 2018 post: Panel decided that 4/1 DCA’s prior decision in San Diegans for Open Government v. City of San Diego, 247 Cal.App.4^th 1306 (2016) was incorrect and followed the reasoning by the 2/8 DCA in Nutrition Distribution, LLC v. Southern SARMS, Inc., 20 Cal.App.5^th 117 (2018) [#19 of our Top 25 Decisions for 2018], concluding that parties moving for CCP § 128.5 sanctions must satisfy the 21-day “safe harbor” requirements of CCP § 128.7.

Discovery, Family Law: Family Law Judges, On Discovery Matters Rather Than OSC Matters, Can Issue Sanctions Based On Declaration Testimony

No Oral Testimony Required Under The Circumstances.

            We found Marriage of Clarke and Akel, Case No. A151888 (1^st Dist., Div. 5 Dec. 11, 2018) (unpublished) to be an interesting case given that it involved an intersection between family law and civil discovery procedures.

            The essence of the matter was a discovery dispute between parties to a marital dissolution proceeding. Eventually, ex-wife was ordered to pay to ex-husband $15,000 on a discovery motion to compel under CCP §§ 2023.030(a), 2031.310(h). The principal challenge was that the family law judge erred in deciding the discovery dispute based on declarations, rather than admitting oral testimony.

            The appellate court affirmed. Nothing exempts family law cases from application of discovery principles, which routinely allow these disputes to be resolved through declaration testimony. This is contrasted with substantive order to show cause matters, which usually require oral testimony unless the parties stipulate otherwise. Beyond that, ex-wife did not object to the declarations such that any argument otherwise was waived.

Year In Review – 2018

Year End Wrap-Up: Mike & Marc’s Top 25 Decisions In 2018

Artist Andrew Scott's stainless steel, 30-foot-long gavel outside the Thomas J. Moyer Ohio Judicial Center

Part 1 of 2—CCP §998, Civil Code § 1717, Civil Rights, Sanctions, And Ethics Dominated First Batch.

            As is traditional during the Holidays, we choose the top attorney’s fees/costs published cases which we deem worthy of a year-end wrap up review. They cut across numerous issues, and we do not intend to denigrate at all the numerous other decisions which were written in these areas—with readers able to find them easily by searching our home page under the “Categories” or “Archives” headings. Here are the first 13 decisions for the 2018 wrap up:

25. HOMEOWNER ASSOCIATIONS – Artus v. Gramercy Towers Condominium Assn., 19 Cal.App.5^th 923 (1^st Dist., Div. 1 Jan. 24, 2018) –authored by Justice Banke; discussed in our Jan. 28, 2018 post: Interim successes by homeowner against homeowner association did not allow homeowner an entitlement to an award of fees under the Davis-Stirling Act.

24. CIVIL RIGHTS – Bustos v. Global P.E.T., Inc., 19 Cal.App.5^th 558 (4^th Dist., Div. 2 Jan. 16, 2018) – authored by Justice Codrington; discussed in our Jan. 16, 2018 and Dec. 22, 2017 posts: Plaintiff obtaining a favorable vote on one jury question, but losing on causation issue, was not entitled to FEHA fee recovery.

23. ALLOCATION/FEE CLAUSE INTERPRETATION/ SECTION 1717 – Burkhalter Kessler Clement & George LLP v. Hamilton, 19 Cal.App.5^th 38 (4^th Dist., Div. 3 Jan. 8, 2018) – authored by Justice Moore, discussed in our Jan. 9, 2018 post: There can be more than one prevailing party where plaintiff prevailed against a limited liability partnership defendant but lost against alter ego defendant, although apportionment of work required where defendants were jointly represented.

22. CIVIL RIGHTS/SECTION 998 – Arave v. Merrill Lynch, Pierce, Fenner & Smith, 18 Cal.App.5^th 1098 (4^th Dist., Div. 2 Jan. 2, 2018) – authored by Justice Slough; discussed in our Jan. 2, 2018 post: Appellate court denied defense expert witness costs as against unsuccessful FEHA plaintiff rejecting a CCP § 998 offer in a nonfrivolous FEHA case, departing company from contrary reasoning in 1/5 DCA and 4/1 DCA decisions. [NOTE: Arave was found persuasive in one of our upcoming top 25 decisions on this split of opinion, see Huerta v. Kava Holdings, Inc., 2018 W 5999639, a 2/8 DCA published opinion issued in November 2018].

21. PREVAILING PARTY/SECTION 1717 – Marina Pacifica Homeowners Assn. v. Southern California Financial Corp., 20 Cal.App.5^th 191 (2d Dist., Div. 8 Feb. 5, 2018) – authored by Justice Grimes; discussed in our Feb. 6, 2018 post: No attorney’s fees awarded to either side where no clear winning prevailing party under Civil Code § 1717 because homeowner did not completely rid a transfer fee but HOA only got 10% of FMV valuation; settlement communications could not be used in determining whether one side prevailed or not for “prevailing party” analysis.

20. SECTION 998 – Gonzalez v. Lew, 20 Cal.App.5^th 155 (2d Dist., Div. 3 Feb. 1, 2018) – authored by Justice Lavin; discussed in our Feb. 3, 2018 post: CCP § 998 joint offer to multiple plaintiffs was not invalid in dispute between both sets of plaintiffs’ heirs and owners of a house. (California Supreme Court denied a petition for review on May 9, 2018.)

19. SANCTIONS – Nutrition Distribution, LLC v. Southern SARMS, Inc., 20 Cal.App.5th 117 (2d Dist., Div. 7 Jan. 31, 2018) – authored by Presiding Justice Perluss; discussed in our Feb. 3, 2018 post: CCP § 128.5 sanctions are not appropriate unless moving party satisfies CCP § 128.7’s “safe harbor” protections, disagreeing with contrary conclusion by 4/1 DCA in San Diegans for Open Government v. San Diego, 247 Cal.App.4^th 1306, 1317 (2016). [NOTE: A different panel of the 4/1 DCA, in the recent December 2018 decision of CPF Vaseo Associates LLC v. Gray agreed with Nutrition Distribution and disagreed with San Diegans, which we will review later in the remainder of our top 25 decisions].

18. ETHICS/EQUITY/RETAINER AGREEMENTS – Heller Ehrman LLP v. Davis Wright Tremaine LLP, 4 Cal.5^th 467 (Cal. Supreme Ct. Mar. 5, 2018) – authored by Justice Cuellar; discussed in our March 8, 2018 post: Dissolved law firm has no property interest in legal matters handled on an hourly basis and has no interest in profits generated by former partners’ work on hourly matters pending at the time of the firm’s dissolution; court refused to decide if Jewel v. Boxer is still applicable to contingency matters.

17. SECTION 1717 – Shapira v. Lifetech Resources, 22 Cal.App.5^th 429 (2d Dist., Div. 4 Apr. 17, 2018) – authored by Justice Collins; discussed in our Apr. 20, 2018 post: Litigant does not face Civil Code § 1717 fee exposure where litigant voluntarily dismisses with prejudice pending matter after trial, under submission, but before any merits decision comes down.   

16. CONSTRUCTION – United Rigger & Erectors, Inc. v. Coast Iron & Steel Co., 4 Cal.5^th 1082 (Cal. Supreme Ct. May 14, 2018) –authored by Justice Cuellar; discussed in our May 15, 2018 post: Construction prompt payment statutes only relate, for penalties and fee exposure, to the relevant payment dispute rather than a more generalized non-retention construction dispute.

15. ETHICS – Sheppard, Mullin, Richter & Hampton v. J-M Mfg. Co., Inc., 6 Cal.5^th 59 (Cal. Supreme Ct. Aug. 30, 2018) – authored by Justice Kruger; discussed in our Aug. 31, 2018 post: Contractual fee recovery is not allowable to law firm with undisclosed conflict of interest, which was not cured by boilerplate conflict waiver from challenging party; however, the matter was remanded to see if the ethical violation was egregious enough to prevent quantum meruit recovery.

14. PROBATE – Powell v. Tagami, 26 Cal.App.5^th 219 (4^th Dist., Div. 1 Aug. 15, 2018) – authored by Presiding Justice McConnell; discussed in our Aug. 9, 2018 and Aug. 16, 2018 posts: Probate compensation allowed for mediation work, personal litigant work, and accounting objector work where unwarranted ad hominem attacks were levied against opposing siblings and their attorneys.

13. COSTS – LAUSD Asbestos Cases, 25 Cal.App.5^th 1116 (2d Dist., Div. 4 Aug. 8, 2018) – authored by Justice Collins; discussed in our Aug. 9, 2018 post): Ability to pay does not enter into determination of whether CCP § 1032 routine costs are assessed against a party, even against a likely more impecunious plaintiff in an asbestos lawsuit. (California Supreme Court denied review on November 20, 2018.)

 

Employment, Costs: Appellate Court Directive That “The Parties To Bear Their Own Costs On Appeal” Does Not Preclude Award Of Appellate Fees

Directive Only Deals With Appellate Routine Costs, With Berman Hearing Fee-Shifting Provision Allowing For Recovery Of Appellate Fees For Prevailing Party Work.

            This case deals with a Berman hearing—an employee’s hearing before the California Labor Commissioner for unpaid wages. Employers gripe because, if a de novo trial is sought in the superior court, they must post an undertaking for the full amount of the award within a short time, they bear responsibility for de novo trial and potential appeals fees should they lose, and the employee can raise other claims not strictly within the Labor Commissioner demand. Well, this case also shows the risk of appealing an adverse Labor Commissioner award in employee’s favor—escalating fees of an astronomical nature. The whole dispute was over a “short” $300 difference in unpaid wages (we are not kidding) with employer fighting all along the way and eventually being assessed with attorney’s fees totaling $88,785, not to mention other statutory penalties and interest. (The appellate fee award of $57,420 was nearly 200 times the $300 amount.) Employers and their counsel need to pay attention to the result here, even though it was unpublished.

            In Stratton v. Beck, Case No. B287001 (2d Dist., Div. 4 Dec. 7, 2018) (unpublished), employee challenged a $300 “short” wage payment by an employer, winning $6,060.96 in the unpaid wages, liquidated damages, interest, and statutory penalties before the Labor Commissioner. Employer appealed and requested a trial de novo in the superior court, and the situation only got worse. The trial court awarded employee $6,778.85 plus $31,365 in attorney’s fees, with the fee determination affirmed in a prior published appellate decision. In doing so, the appellate court directed the parties “to bear their own costs of appeal in the interest of justice.” Employee then filed a motion to recoup appellate attorney’s fees, seeking a lodestar of $57,420 plus a 2.0 positive multiplier. The lower court granted an additional award of appellate fees of $57,420, the lodestar (but with no positive multiplier enhancement).

            Employer appealed the appellate fee award, with no change in result. He first argued that the prior appellate directive of “bearing own costs” means no fees could be awarded, but this was doomed because: (1) appellate fees under the Berman hearing fee shifting provision (Labor Code section 98.2(c)) are authorized for appellate work (Eicher v. Advanced Business Integrators, Inc., 151 Cal.App.4^th 1363, 1384 (2007); Nishiki v. Danko Meredith, APC, 25 Cal.App.5^th 883, 899-900 (2018)); and (2) CRC 8.278(d)(2) expressly provides costs do not include attorney’s fees with respect to appellate costs language—which is different than trial court “costs” language (Butler-Rupp v. Lourdeaux, 154 Cal.App.4^th 918, 925 (2007), found to be indistinguishable with respect to resolving this appellate cause).

            Although arguing that the lower court has discretion to deny fees to a matter which could have been a limited civil matter, employer’s problem was that he did not bring this issue up such that it was waived. As far as the amount of the award, the lower court did deny the multiplier request, so no abuse of discretion was shown; $300 became $89K-plus!

Allocation, Indemnity: CFO Was Entitled To Attorney’s Fees Indemnification Under Corporations Code Section 317(d) For Win On Settlement Release Issue

Remand Requires To Apportion Fees Expended In Establishing Validity Of Release And Defendants Against Fraud In The Inducement Claims—However, It Did Not Adopt Wilshire Test For Corporate Indemnification.

            Protech Services, Inc. v. Gillette, Case No. C083975 (3d Dist. Dec. 6, 2018) (unpublished) is an interesting decision on the scope of mandatory indemnification under Corporations Code section 317(d) where a CFO won a dispute based on a release in a separation agreement. However, the real issue was whether he was entitled to indemnification under section 317(d), with the Third District essentially eschewing the reasoning on the issue in Wilshire-Doheny Associates, Ltd. v. Shapiro, 83 Cal.App.4^th 1380, 1394 (2000).

            What happened here was that CFO won various-fraud based theories brought by his former employer after a bifurcated trial in which a release in a separation agreement was found to have released the claims against him. The trial court awarded CFO, as against plaintiff corporation, attorney’s fees pursuant to an indemnity provision contained in his employment agreement, Corporations Code section 317, and the corporation’s bylaws—to the tune of $715,770. The Third District agreed fee recovery was justified, but decided it had to be apportioned to only encompass work spent in establishing the validity of the release and defending against the fraud rescissionary claim.

            The Court of Appeal had no difficulty in concluding CFO was entitled to mandatory indemnification under section 317(d). Where it had difficulty was following language in Wilshire determining that, although mutual release was a release on the merits for a corporate agent, a remand was necessary to determine if the officer properly acted as an agent. Instead, the Third District interpreted requiring “success on the merits” to require both lack of liability and innocence of the alleged misconduct. (Slip Op., at p. 27.) It did not agree with Wilshire that only one of these elements was required to determine “success on the merits.” However, both of these elements were established by CFO here. In the end, because the award encompassed a variety of work, it needed a “re-do” to determine the fees expended in establishing the validity of the release and defending the claims or fraud in the inducement. Because the corporate bylaws provided no greater indemnification than section 317, no further analysis was needed.

Consumer Statutes, Section 998: Plaintiff Winning Only $2,636.50 In Attorney’s Fees And Costs In Lemon Law Case Was Entitled To Reversal And Remand

Trial Judge Improperly Imposed CCP § 998 Sanctions When Offer Was Improper, Such That Cut-Off Fee Determination Was An Abuse of Discretion.

            In Etcheson v. FCA US LLC, Case No. D072793 (4^th Dist., Div. 1 Dec. 6, 2018) (unpublished), plaintiff brought a “lemon law” action relating to a $40,000 purchase of a 2010 Chrysler Town & Country vehicle. The defense made two CCP § 998 offers, the first of which was determined to be invalid and the second offer sweetening the deal somewhat. After some wrangling following the second 998 offers, the parties reached a deal under which the defense agreed to pay $76,000 for the vehicle, with plaintiff deemed the prevailing party for purposes of any future fees/cost recovery (given that the lemon law has a pro-plaintiff fee-shifting statute).

           Plaintiff moved for $89,445 in lodestar fees plus a positive 1.5 multiplier as well as over $5,000 in costs. Over defense objection, the trial judge issued an initial tentative decision awarding plaintiff $81,745 in fees and $5,059 in costs. However, after further arguments, the trial judge substantially reduced the tentative by awarding plaintiff a total of $2,636.90 in fees and costs ($2,095 in fees and $541.90 in costs). The rationale for the final award was that plaintiff should have shut down the litigation after the initial 998 offer which was somewhat in the ballpark although uncertain in nature.

            The 4/1 DCA reversed and remanded.

            The infirmity in the award was that the lower court incorporated the section 998 penalty into cutting off compensability for the lemon law prevailing party despite the fact that the offer was uncertain. This went against the pro-plaintiff nature of the lemon law fee-shifting statute, supported by the reasoning in cases such as McKenzie v. Ford Motor Co., 238 Cal.App.4^th 695 (2015) [4^th Dist., Div. 3] and Goglin v. BMW of No. America, LLC, 4 Cal.App.5^th 462 (2016) [4^th Dist., Div. 1]. “The import of both Goglin and McKenzie is that where a defendant's settlement offer contains unfavorable provisions or is otherwise invalid, as FCA's offers were here, it is not unreasonable for a plaintiff to reject that offer. (Goglin, supra, 4 Cal.App.5th at p. 471; McKenzie, supra, 238 Cal.App.4th at p. 708.)” (Slip Op., at p. 21.)

Sanctions: 4/1 DCA Panel Agrees That CCP § 128.5 Sanctions Are Unwarranted Unless Moving Parties Comply With CCP § 128.7 “Safe Harbor” Requirements

Panel Disagrees With Prior 4/1 Panel In San Diegans for Open Government And Follows Contrary Result Reached By 2/7 DCA In Nutrition Distribution.

            We find the result in CPF Vaseo Associates, LLC v. Gray, Case No. D072909 (4^th Dist., Div. 1 Dec. 6, 2018) (published) both refreshing and correct in its reasoning. It goes to show you that appellate courts, even within different panels in a particular division, are willing to disagree among themselves.

            In this one, a 4/1 DCA panel decided that CCP § 128.5 moving parties must satisfy the 21-day “safe harbor” requirement of CCP § 128.7 in order to be procedurally entitled to sanctions—providing the opposing party an opportunity to withdraw the challenged conduct. This panel decided that a different 4/1 DCA panel’s decision to the contrary in San Diegans for Open Government v. City of San Diego, 247 Cal.App.4^th 1306 [reviewed in our June 9, 2016 post] was not the right result, siding instead with the reasoning by the 2/7 DCA in Nutrition Distribution, LLC v. Southern SARMS, Inc., 20 Cal.App.5^th 117, 130 [reviewed in our Feb. 3, 2018 post].

            BLOG OBSERVATION—Co-contributor Mike made this argument before a Los Angeles County Superior Court judge, who did not accept it because only San Diegans was published at the time. Likely, this decision may make unnecessary California Supreme Court review given that there is now an intermediate appellate court “plurality” requiring compliance with the “safe harbor” requirements.

Costs, Probate, Section 998: Insurance Company Controlling Litigation Is De Facto Party Under Probate Code, Liable For Litigation Costs Under Rejected CCP § 998 Offer

Because Insurance Company Controls The Litigation, Court Looks Past "Legal Fiction" That Decedent's Estate Is The Party.

        Amanda Meleski was injured when Albert Hotlen ran a red light and collided with her vehicle. But by the time Mr. Hotlen could be served with a summons, he was dead. However, Mr. Hotlen had purchased a $100,000 policy from Allstate. Ms. Meleski offered to settle with Allstate for one dollar less than policy limits, to wit, for $99,999. Allstate rejected the offer, went to trial, and took a hit from the jury for $180,613.86. Ms. Meleski then sought to recover expert witness fees and other litigation costs, in the amount of $66,017.08, pursuant to section 998, having done better at trial than the offer that Allstate rejected. However, the trial court held that her recovery against Allstate was limited by the policy limit of $100,000. She appealed. Meleski v. Estate of Hotlen, Case No. C080023 (3rd Dist. Nov. 29, 2018) (published).   

        The appellate court refused to ignore the reality that Allstate controlled the litigation, adding: "Moreover, we find it manifestly unfair that section 998 could be employed by Allstate to recover costs from the plaintiff (which costs it would have no obligation to pay to the estate), but Allstate would have no corresponding responsibility to pay costs merely because it is not the named party." The Third District reversed the order denying an award of costs from Allstate, modifying the award to add $66,017.08 to the $100,000 in damages.

Prevailing Party: Plaintiff Obtaining Some Scaled Back Damages And Declaratory Relief On Environmental Contamination Properly Awarded $1.345 Million In Fees

Although Not Winning Everything, Plaintiff Did Obtain Significant Declaratory Relief So As To Be Deemed The Prevailing Party.

            In Hot Rods, LLC v. Northrop Grumman Corp., Case No. G054432 (4^th Dist., Div. 3 Dec. 5, 2018) (unpublished), the case involved environmental contamination of a property in Anaheim that was sold by defendant to certain buyers, who transferred their interest to plaintiff. Originally, plaintiff won $1.116 million in damages plus almost $2.1 million in costs based upon a referee’s recommendation on both contract and tort claims. However, the bulk of the damages award was reversed on appeal, with the appellate court determining only $117,050 of the original damages award could be upheld. This reversal also required a “restudy” of the fee award. On remand, the referee performed a new analysis of the fee request, finding that nearly $1.345 million was a reasonable fee award, computed as 60% of fees for trial, post-trial work, the appeal, and “fees on fees” activities. Defendant predictably appealed.

            The fee award was affirmed.

            The Purchase and Sale Agreement fees clause was broad, with the defense having to concede it covered all of plaintiff’s claims. So, the appeal really dwindled down to a focus on whether the “prevailing party” determination by the referee was proper. It was.

            Although agreeing that plaintiff did not achieve a complete victory based on its prior “shaving” of compensatory damages, it was not contestable that it did win a substantial declaratory relief victory—the environmental indemnity applied both to first-party and third-party claims—as against defendant. As the Court of Appeal put it, “Indeed, given [the defense] position that the indemnity clause only applied to third party claims, the declaratory relief judgment is the whole ball game.” (Slip Op., p. 12.) The whole record showed plaintiff, with mixed results, left it to the lower court to decide who prevailed—plaintiff got the “call,” one which was subject to a deferential abuse of discretion standard which could not be hurdled in this one by the defense.

            Justice Moore was the author of this 3-0 decision.

Family Law: Third District Affirms Discretionary Family Law Fees And Spousal Support Awards Because No Reporter’s Transcript Provided

Trial Judge Is Presumed To Follow The Law In Lines With His/Her Official Duties.

            We have posted many times that it would be a good (if not mandatory) idea to have a reporter present for discretionary fee award proceedings. The Third District, in line with other sister court courts (especially the Second District, Division 5), recently followed authority that error on discretionary rulings cannot be presumed where a reporter’s transcript is not provided on fee and pendente lite spousal support rulings. We refer you to Marriage of Asefirad & Rakhshandeh, Case No. C085720 (3d Dist. Dec. 5, 2018) (unpublished) to show another affirmance based on the lack of a RT, because judges are presumed to follow the law and error must be affirmatively demonstrated. Without a RT, these presumptions could not be overcome.

Appealability: Where Judgment Reserved Fee Entitlement Decision For A Later Noticed Motion, Eventual Losing Party’s Appeal Of Just The Judgment Rather Than Subsequent Fee Award Meant Appellate Court Could Not Entertain Appeal On Fee Issue Down The Line

No Entitlement Determination Made In Judgment, So Separate Appeal Of Later Fee Order Required.

            We do not want to drum a theme we have stressed before, which is to separately appeal fee determinations. We are in the Holidays, so – pa rum pum pum (ala Drummer’s Boy lyrics on a Holiday song) – we again stress to separately appeal fees orders, even if you think they might be subsumed by the judgment. As Fontaine v. Hoult, Case No. G054072 (4^th Dist., Div. 3 Dec. 4, 2018) (unpublished) shows, it pays to appeal from the latter fee order.

            What happened here is that plaintiff appealed from a fee award in favor of insurance company under the interpleader statute, CCP § 386.6, to the tune of $212,270. However, the appeal was dismissed. The reason was that plaintiff did not appeal from a subsequent fee order, but from an earlier judgment. That created a jurisdictional hurdle which could not be overcome. The judgment did not determine fee entitlement (which some judgments do) such that the subsequent fee order liquidating the amount of fees could not be swept into the judgment for appealability purposes. So, that distinguished other situations such that the failure to appeal the subsequent order translated into the appellate court having no jurisdiction to entertain the fee appeal. The appeal on the fee issue was dismissed accordingly.

            Justice Ikola authored the 3-0 opinion.

Construction, Section 1717: Defendant Prevailing On Only One Payment Withholding Issue Not Entitled To Fee Recovery Under Prompt Payment Statutes And Plaintiff Only Entitled To Reasonable Fees Under Contractual Fees Clause

Plaintiff’s Request For Full Fees Ignores That Section 1717 Only Allow For Recovery Of Reasonable Fees.

            Co-contributor Mike knew right away that McMahon Steel Co. v. Angeles Contractor, Inc., Case No. G054053 (4^th Dist., Div. 3 Dec. 3, 2018) (unpublished) was written by Acting Presiding Justice Bedsworth. Here is how it opens: “The most famous stadium in the United States is not the house that Ruth built. Hard as it is for baseball fans to admit, it is not even Fenway Park or Wrigley Field. It is, rather, the stadium that has dominated New Year’s Day since 1923, and continues to, even when national collegiate titles are often decided in other venues. It’s the Rose Bowl.”

            The appeal before the 4/3 DCA involved plaintiff subcontractor’s suit against defendant contractor arising out of a 2011 Rose Bowl refurbishment in preparation for soccer’s Gold Cup (won that year 4-2 by Mexico over the U.S.). Plaintiff obtained a net judgment of $533,000, although losing a prompt payment “funds wrongfully withheld” issue for statutory penalties based on the lower court’s finding that there was a good faith dispute between the parties.

The trial judge refused to award any fees to defendant for this one win, but she did award plaintiff $318,016.47 in fees out of a requested $422,221.01 as against defendant.

            Both sides appealed the fee rulings. Both sides gained nothing more on appeal.

            Defendant’s appeal of fee denial. The fee provisions allowing for collection of fees in funds wrongfully withheld cases, Civil Code section 8802 and Business & Professions Code section 7108.5, only allow them to the prevailing party in an “action.” Because defendant only prevailed on one issue and plaintiff obtained the net judgment in the overall action, fees were properly denied to the defense by the lower court.

         Plaintiff’s appeal of fee award, arguing all requested fees should have been awarded.

        Plaintiff argued that all of its requested fees should be awarded, because the contractual fees clause was worded to allow recovery of “all costs, including attorneys’ fees.” The Court of Appeal said no, because Civil Code section 1717 does not allow for inconsistent or contrary fees clauses to overcome section 1717’s requirement that the fees be reasonable in nature. The lower court did award reasonable fees to plaintiff, primarily after excluding some unrelated work against the City.

Class Action: New Amendments To F.R. Civ. P. 23 Became Effective 12/1/18

Among Others, District Judge Has To Approve Payment Or Consideration To Objectors Or Their Counsel For Withdrawing Objections Or Abandoning Appeals.

            Effective December 1, 2018, Federal Rules of Civil Procedure, rule 23 was amended in several respects to clarify notice requirements relating to class action settlements, bulk up “preliminary approval” standards with added clarity, amplify on “final approval” procedures, and iterate there are no appeals from preliminary approval orders.

            As it related to our blog, there were some amendments to rule 23(e)(5) relating to objectors in class action cases, inspired by concerns that some objectors (mainly professional objectors) try to “hold up” settlement distributions to the class in order to obtain payoffs to themselves and/or their counsel. To address these concerns, subdivision (e)(5) was amended to provide that any agreement where payment or consideration to an objector is involved (including payment to an attorney) such that an objection is withdrawn or an appeal is abandoned, the district judge must approve such an agreement even if the settlement occurred after an appeal was taken. In the latter situation, the district court must give an “indicative ruling” under F. R. Civ. P. 62.1. Some commentators along the way have suggested that objectors should be required to post an undertaking on appeal, but this reform was not adopted—even though district judges have ordered it in unusual circumstances.

            If you want to know more about these amendments, John M. Barkett of Shook, Hardy & Bacon L.L.P. of Miami, Florida has written a good article entitled “The 2018 Amendments to the Federal Class Action Rule,” which easily can be found for reading on the Internet.

Intellectual Property, Preemption, Prevailing Party: Defendants’ Prevailing On Preemption Claim Under State Statute With Mandatory Fees Clause Was Entitled To Appellate Fees For The Win

Even Though A Few Sliver Claims Remained, Defendants Prevailed Because Those Claims Are Not Subject To Fee Shifting.

            The Ninth Circuit, in an earlier appeal, had decided that plaintiffs’ claims for resale royalties under the California Resale Royalties Act (CRRA) largely were preempted by the 1976 Copyright Act for any claims occurring after January 1, 1978. However, they found some “sliver claims” were appropriate for dates before that 1/1/78 cutoff. Defendants then moved the Ninth Circuit for recovery of fees as the prevailing party on appeal under CRRA’s fee-shifting provision, California Civil Code section 986(a)(3), an application opposed by plaintiff.

            In Close v. Sotheby’s, Inc., Nos. 16-56234 et al. (9^th Cir. Dec. 3, 2018) (published), the Ninth Circuit granted the appellate fee application, remanding to the Appellate Commissioner to determine the amount of fees under Ninth Circuit Rule 39-1.9. It rejected a number of arguments made by plaintiff to the fee application.

            It first rebuffed the argument that anything in the prior decision implied that the CRRA was null and void (and, hence, the fees clause also). It simply found most claims preempted, not that CRRA was “non-existent” such that defendants prevailed on the preemption argument.

            The Ninth Circuit next found that nothing in the Copyright Act preempted the CRRA fee-shifting provision, so that the defense again prevailed and was entitled to fee recovery.

            Last, it determined that defendants indeed did prevail. Although there were a “sliver” of claims remaining, plaintiff’s residual claims were not subject to fee-shifting under CRRA such that there was finality for purposes of finding that the defense “prevailed.”

Consumer Statutes, Equity: Fifth Circuit Court Of Appeals Affirms Denial Of Fees In Fair Debt Collection Practices Act Case Where Plaintiff Only Recovered $1,000 Statutory Damages But Sought Recovery Of $130,410 In Fees

Fifth Circuit Sided With Two Other Circuits That Fees Can Be Denied In Unusual Circumstances, With Shocking Nature Of The Request Plus Conspiracy To Manufacture The Claim Solidifying The Fee Denial.

            Davis v. Credit Bureau of the South, No. 17-41136 (5^th Cir. Nov. 16, 2018) (per curiam) demonstrates how federal courts, even under a statutory scheme where fee recovery is mandatory, can affirm a fee denial where unusual circumstances show it would be unjust to award anything to plaintiff’s attorneys.

            What happened in this one was that plaintiff sued defendant on the theory that defendant misrepresented itself as a credit bureau in its attempt to collect on a $107.29 water bill via a collection letter and a subsequent phone call, suing under the Fair Debt Collection Practices Act (FDCPA).   The district judge, based on a magistrate recommendation, found a violation and awarded $1,000 statutory damages, but nothing more.

Plaintiff then sought to recover $130,410, an amount which shocked the district court and resulted in a denial of any fees.

            The Fifth Circuit affirmed.

            There is a fee-shifting provision under the FDCPA which is codified at 15 U.S.C. § 1692k(a)(3) in favor of prevailing plaintiffs. But there is a split in thinking on whether it is mandatory in nature, although worded that way. The Third and Fourth Circuits determined, contrary to other circuits, that a district judge can deny fees in “unusual circumstances,” such as bad faith. The Fifth Circuit followed suit under the facts of this particular case.

            Here is what cemented why “unusual circumstances” were present: (1) the case was easily resolved through one Fifth Circuit opinion, such that not a lot of work was justified to get to the ultimate merits result; (2) the request was shockingly excessive in nature, with duplicative and inefficient work being contained in the supporting substantiation; and (3) there was some evidence that plaintiff “conspired” with attorneys to create a claim in order to generate a high fee request. Fee denial affirmed.

Private Attorney General: Trial Court’s Calculation Of Benefits To Intervenors’ Retirees Was Overblown Such That The Whitley Financial Benefit/Cost Analysis Required A Remand To Award Section 1021.5 Fees To Intervenors

$588,000 Fee Request Gets A Second Study, Based On Whitley And Other Factors.

           In City of Oakland v. Oakland Police and Fire Retirement System, Case No. A144653 (1^st Dist., Div. 4 Nov. 29, 2018) (published), intervenors sought to recover $588,000 in attorney’s fees under the private attorney general statute (CCP § 1021.5) and the federal civil rights statute (42 U.S.C. § 1988) based on some successes in defending the legitimacy of certain retirement benefits with respect to some public retirees and firefighters. The trial judge denied the fee request altogether, prompting an appeal by intervenors.

            The appellate court reversed and remanded, finding section 1021.5 fee recovery was proper under the circumstances.

            The first flaw was that the trial judge way overexaggerated the financial benefits being defended by intervenors. The lower court estimated they were $13 million (after making deductions from a “top ceiling” $39 million potential benefit estimated number).   However, the appellate court found that they actually were more like $3.5 million in benefits versus the $500,000 in litigation costs which would be incurred. Under Conservatorship of Whitley (2010) 50 Cal.4^th 1206, 1215-1216, 1220-1221 [our Leading Case No. 14], a trial judge can award section 1021.5 even if the expected benefits exceed costs by a substantial margin. Here, the expected value figure looked to be overblown, such that the expenses to be borne as compared to the expected benefits justified fee recovery.

            The second problem was that the lower court refused to consider the financial status of the litigants in determining an award. After analyzing a number of cases, the 1/4 DCA decided that this is a relevant consideration under section 1021.5.

            Although the degree of success can influence both the entitlement to and amount of the award, intervenors were able to halt the Board from demanding repayments of $4.5 million in past benefits by retirees—a strong degree of success and enforcement of pension rights which are of importance. With respect to the significant benefit factor, intervenors protected 590 live pensioners, so that was large enough to warrant section 1021.5 fees. Reversed and remanded.

Arbitration, Prevailing Party: Party Defeating Petition To Compel Arbitration, The Only Contractual Claim, Was Entitled To Fee Recovery Despite No Completed Arbitration On The Noncontract Claims

Finality Was Present With Respect To The One Contractual Issue, Justifying Civil Code Section 1717 Recovery.

            In an earlier published decision, general contractor was found to have waived the right to compel arbitration in construction defect and mechanic’s lien cases which ultimately were consolidated. The winning party on the arbitrability dispute, the only contractual claim, moved for contractual fees and was awarded $14,805. The appellate court in Von Becelaere Ventures, LLC v. Zenovic, Jr., Case No. D073108 (4^th Dist., Div. 1 Nov. 29, 2018) (unpublished) found that the situation was not premature for a fee recovery because the winner did win on the only contractual issue even though remaining noncontractual claims had not yet been arbitrated.

Fee Clause Interpretation: Broad Settlement Agreement Fees Clause Allowed For Recovery Of Fees In Fraudulent Stripping Of Assets Case

$188,000, After About $86,000 Reduction, Was The Sustained Fee Award.

            In Langer’s Delicatessen, Inc. v. Sino Enterprises, Inc., Case No. B287333 (2d Dist., Div. 4 Nov. 28, 2018) (unpublished), plaintiff won an action for fraudulent stripping of assets by a defendant based on a prior judgment and a settlement agreement. The settlement agreement had a broadly worded fees clause such that the trial judge awarded $188,000, about $86,000 less than the requested amount. The fees clause was broadly worded such that it allowed for fee recovery, with the court not having to address the fact fee authorization is not discussed under California’s voidable transfer statute.

Homeowner Associations, Mediation, Reasonableness Of Fees: $225,000 Fee Recovery In Favor Of HOA And Against Losing Condo Owner Affirmed On Appeal

Mediation Requirement Did Not Apply To HOA-Owner Dispute, Owner Failed To Specifically Identify Objections Fees, And Lower Court Did Award Substantially Reduced Fees From The HOA’s Requests.

            We have done many posts showing how HOAs or owners can be subject to substantial fee exposure for losing HOA-owner disputes. Seahaus La Jolla Owners Assn. v. Witt, Case No. D071229 (4^th Dist., Div. 1 Nov. 27, 2018) (unpublished) illustrates how this can happen, with the non-prevailing condo owner hit with $225,000 in fees in a losing effort.

            HOA sued condo owner to recapture costs incurred in repairing condo owner’s unit after a water leak, with owner cross-complaining against HOA and certain of its directors. The condo owner lost on both the complaint and the cross-complaint after bench proceedings. The trial judge later awarded HOA $ 150,000 in fees (out of a requested $240,000) on its complaint and $75,000 in fees (out of a requested $160,000) for defending against the cross-complaint.

            These determinations were affirmed on appeal. No prelitigation mediation was required because that only applied to developer-condo owner disputes, not HOA-condo owner controversies. Plaintiff failed to identify what portions of the fee requests were duplicative, excessive, or unreasonable, with the trial judge’s reduction showing good discretion was exercised.

Substantiation Of Reasonableness Of Fees: Counsel Declarations Sufficed To Justify $425,000 Fee Award In HOA’s Favor

Losing Condo Owner’s Failure To Specify Excessive, Generic Time Entries Also Fatal.

            The fee substantiation requirement in California state courts is much less than in federal courts. Federal courts favor submission of detailed timesheets, while attorney declarations and the trial judge’s perception of the work can indeed support fee recovery in California state courts. Plaintiff, a condo owner, lost a water intrusion dispute against a Mammoth HOA, with the lower court awarding the HOA $425,000 in attorney’s fees as the prevailing party. The Third District affirmed in Bakas v. Mountainback Condominium Owners Assn., Case No. C081052 (3d Dist. Nov. 27, 2018) (unpublished, modifying prior unpublished decision and denying a rehearing). The appellate court determined that (1) losing party’s failure to specify what entries were duplicative, excessive, or generic forfeited the challenge on appeal, and (2) counsel declarations and the trial judge’s gauging of the fee claimant’s attorney work could support a fee award in California state courts even in the absence of detailed timesheets.