CALIFORNIA ATTORNEY'S FEES

Costs: California Supreme Court Decides That Unused Trial Exhibit Copies And Demonstrative Aids Can Be Awarded As Routine Costs In The Discretion Of The Lower Court

No Categorical Grant On This Costs Category, But Discretionary Call For Lower Court.

            In Segal v. ASICS America Corp., Case No. S263569 (Cal. Supreme Court Jan. 13, 2022) (published), the California Supreme Court confronted a split on appellate thinking on whether trial exhibit photocopies and demonstrative aids, not used during the trial, can be awarded as routine costs under Code of Civil Procedure section 1033.5.  Although determining that these costs are not categorically recoverable under section 1033.5(a)(13) (because the unused materials were not helpful to the trier of fact because they were never presented before the trier of fact), they were not expressly prohibited under section 1033.5(b).  However, that did mean that they could be discretionarily recovered as costs under section 1033.5(c)(4) if they are determined by the lower court to be reasonably necessary to the litigation.  Our high state court also indicated that the same discretionary rule would apply to exhibits or materials found to be inadmissible at the trial level.  Again, a trial judge’s discretion will be key on the recovery of these types of claimed costs.   The opinion was authored by Chief Justice Cantil-Sakauye.

Mediation: Nonprevailing Party’s Failure To Abide By Contractual Mediation Deadline Rightfully Allowed Prevailing Party To Obtain Fees Under Contractual Fee Clause

Prevailing Party Did Try To Mediate Within The Deadline, But Nonprevailing Party Didn’t Comply.

            Seller prevailed in a lawsuit against Buyer which was subject to a contractual attorney’s fees clause.  The contract between the two sides had a mediation clause requiring good faith efforts to mediate within a 45-day period.  Seller provided six options for mediation, but they were rebuffed by Buyer based on multiple reasons.  Seller recovered $119,261 in attorney’s fees.  Buyer, in His Passion, Inc. v. Adhvaryu, Case Nos. G059483 et al. (4^th Dist., Div. 3 Jan. 12, 2022) (unpublished), argued that the lower court erred in concluding that Seller fulfilled in good faith the mediation obligation by sticking to the 45-day deadline (even though two dates were offered even after the deadline).

            The 4/3 DCA, in an opinion authored by Justice Goethals, affirmed.  Good faith, for purposes of the mediation clause, was a factual question.  The record demonstrated that Seller tried to schedule the mediation, with there being no problem that he essentially enforced the contractual deadline agreed to by both parties.   Instead, based on some of the Buyers filing a Los Angeles lawsuit without mediation, the inference from this course of conduct was that the Buyer never was interested in participating in the mediation process. 

Deadlines, SLAPP: SLAPP Defendants Must File A Formal Costs Memorandum Or Fee Motion After Plaintiff Voluntarily Dismisses Action In Order To Claim SLAPP Fees

Failure To File Was Dispositive To Majority Opinion; Dissent Believed That The Fee Entitlement Request In The SLAPP Motion Papers Properly Teed Up The Issue.

            Over a dissent, a majority of an appellate court panel in Catlin Ins. Co., Inc. v. Danko Meredith Law Firm, Inc., Case No. A160358 (1^st Dist., Div. 4 Jan. 11, 2022) (published) decided that SLAPP defendants had to file a costs memorandum or a fee motion to recover prevailing party fees after a plaintiff voluntarily dismissed the entire action rather than rely upon a fee entitlement request in the SLAPP merits papers which the lower court determined to be moot.  The lower court did indicate that it would entertain a post-dismissal request, but the SLAPP defendants did not do so.  That was a mistake, according to the majority.  So, the upshot here is that SLAPP defendants need to file a costs memorandum or fee request for purposes of preserving fee entitlement following a voluntary dismissal.  The dissent opined that the fee entitlement was properly “teed up” in the moving papers on the merits, such that the lower court should have ruled on it and the entitlement request. 

Consumer Statutes, Section 998: Covert Decision Now Published

Case Deals With Lemon Law Section 998 Offer Terms and Validity.

            In our January 4, 2022 post, we posted on Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022), unpublished at the time.  It considered CCP § 998 offers in a lemon law case, specifically what terms are appropriate and whether the offers were valid.  We can now report that the decision was certified for publication on January 11, 2022.

Arbitration: After Having An Arbitration Award Previously Vacated And Having A New Petition To Compel Arbitration Denied, $181,375 Fee And $42,828.88 Cost Awards Affirmed On Appeal

Appellate Court Found That Fee/Costs Awards Were Not Premature.

            In Borisoff v. The Pullman Group, LLC, Case No. B297162 et al. (2d Dist., Div. 1 Jan. 11, 2022) (unpublished), a substantial prior arbitration award was vacated, a lower court refused to grant a new motion to compel arbitration, and the lower court awarded the party fending off the arbitration award and motion $181,375 in fees and $42,828.88 in costs (many of which were arbitration costs).  The arbitration petitioning party challenged the awards as being premature and not within the scope of the contractual agreements between the parties.

            The 2/1 DCA affirmed.  Although acknowledging that there was no final judgment because the other side’s affirmative claims still existed, the appellate court found that the contractual clause between the parties was broad enough to allow for arbitration and post-arbitrations fees/costs because Borisoff forestalled arbitration.  In doing so, it relied on Marcus & Millichap Real Estate Inc. Brokerage Co v. Woodman Inv. Grp., 129 Cal.App.4^th 508, 514-515 to decide that Borisoff prevailed at the arbitration and post-arbitration stage. It also found that the arbitration expenses were recoverable based on the wording of the fees clause.

            BLOG OBSERVATION—The problem here is the appellate court’s resolution of the prematurity argument.  This same Division reached a contrary result in Roberts v. Packard, Packard & Johnson, 217 Cal.App.4^th 822 (2013), where there were remaining claims to be resolved.  Roberts was not even discussed in the opinion.

Deadlines, Judgment Enforcement, SLAPP, Special Fee Shifting Statutes: Where Trial Court Correctly Determined Reimbursement Of Fees/Costs Sought By Prevailing SLAPP Defendant Were For Judgment Enforcement, Not Appellate Fees, Motion Was Timely Filed

Distinction Between Enforcement Fees And Appellate Fees Set Forth In McQueen Governed.

            In Laue v. Ortiz, Case No. H047475 (6^th Dist., January 7, 2022) (unpublished), defendant successfully SLAPPed plaintiff’s complaint and was awarded fees and costs as mandated under Code Civ. Proc. § 425.16(c)(1) – the anti-SLAPP fee shifting provision.  After unsuccessfully appealing the order granting defendant’s anti-SLAPP motion and having his appeal of the fees/costs award dismissed as a nonappealable order, plaintiff filed an unsuccessful motion in the trial court to set aside the order granting defendant’s anti-SLAPP motion and awarding defendant fees/costs.  In its order denying the set aside motion, the trial court awarded further attorney fees and costs to defendant. Plaintiff appealed the order and defendant moved to dismiss the appeal – a motion denied as moot when plaintiff filed an abandonment of his appeal.

            More than 60 days later, defendant moved in the trial court, under Code Civ. Proc. §§ 425.16(c)(1) (anti-SLAPP) and 685.040 (judgment enforcement) for reimbursement of the attorney fees she incurred in connection with plaintiff’s abandoned appeal. Plaintiff opposed – claiming defendant was mischaracterizing the fees as being incurred in judgment enforcement, which provides for a two-year deadline from the date costs were incurred, because she had missed the deadlines under California Rules of Court for seeking fees/costs properly categorized as appellate fees/costs. The trial court disagreed – determining the fees to be properly categorized as judgment enforcement – and granted defendant’s motion. 

            Plaintiff appealed – arguing that defendant’s fee motion was for appellate fees/costs and therefore not timely.  However, the Sixth District concluded that the trial court was correct in its determination and affirmed. As set forth in Conservatorship of McQueen, 59 Cal.4th 602 (2014) [discussed in our July 11, 2014 post], when a fee-shifting statute authorizes the award of attorney fees, fees incurred in enforcement of the judgment – such as defending the judgment from attack – are recoverable under section 685.040.  Further, appellate fees are those incurred on direct appeal from the judgment at issue. (McQueen, 59 Cal.4^th at p. 610.) Here, although the fees/costs were incurred on appeal, they were not incurred on direct appeal from the judgment.

Trespass: 4/2 DCA Affirms Denial Of Code of Civil Procedure Section 1021.9 Attorney Fees To Cross-Complainant Achieving Partial Success On Trespass Claim

Trespass Claims Were Brought Only For The Purpose Of Recovering Attorney Fees To Which Cross-Complainant Would Otherwise Not Be Entitled As Their Lawsuit Was, At Its Core, A Quiet Title Action To Settle A Boundary Dispute.

            Code of Civil Procedure § 1021.9 allows for the recovery or reasonable attorney fees to the prevailing party in an action to recover damages to personal or real property resulting from trespassing on lands either under cultivation or intended/used for the raising of livestock.

            In Cal. Artichoke and Vegetable Growers v. Larson, Case No. E074267 (4^th Dist., Div. 2 January 7, 2022) (unpublished), owners of adjoining agricultural properties got into a boundary line dispute. Plaintiffs filed an action seeking declaratory relief regarding the boundary line, and defendants cross-complained for the same, but also alleged a trespass cause of action related to a 1,300 foot long grape stake fence plaintiffs put up 25 feet into defendants’ property. After defendants successfully moved for summary adjudication on the boundary issue, a jury trial was held on the trespass issue – with the jury finding in plaintiffs’ favor, that they had not intentionally entered or caused another person to enter defendants’ property.  Subsequently, the trial court granted defendants’ motion for judgment notwithstanding the verdict as to the trespass claim, but denied it as to damages. Instead a separate bench trial was held on the issue of damages – with the trial court awarding tenant defendant nominal damages of $36.

            However, for several reasons, the trial court denied defendant’s motion to recover $451,830.50 in section 1021.9 attorney fees. First, the trial court concluded that an award of actual damages, not nominal damages, was required. Second, it found defendants only pursued the trespass claims as a means of obtaining attorney’s fees because the lawsuits were essentially seeking declaratory relief for a boundary line dispute, and that such "bootstrapping" would be contrary to the intent of section 1021.9. Third, it determined that $451,830.50 in fees was “outrageous and not reasonably incurred,” given that no actual damages were proven. Fourth, the trial court concluded that defendants failed to prove the trespass occurred on “lands under cultivation,” which is required for an award of attorney’s fees under § 1021.9.

            On appeal, defendant failed to address the trial court’s conclusion that defendants’ cross-complaint was a quiet title boundary line dispute - not an action to recover for damages to real property resulting from trespassing that would be entitled to fee recovery under section 1021.9. As a result, defendant forfeited that argument, and the 4/2 DCA could not reverse even if the trial court erred in one of the other reasons it cited because an appellate court cannot reverse, where a trial court has given multiple reasons for its ruling, unless the appellant demonstrates error as to each reason given. (People v. JTH Tax, Inc., 212 Cal.App.4th 1219, 1237 (2013).)

Family Law, Sanctions: Sixth District Affirms Trial Court’s Imposition Of $2,520 In Section 271 Sanctions Against Husband And Denial Of Husband’s Request For $100 Million In Sanctions Against Wife And Her Attorney

Husband’s Conclusory Assertions Of Trial Court Error With No Record On Appeal, No Supporting Argument Nor Legal Authority, And His Failure To Have Followed Statutory Procedure In The Lower Court Doomed His Appeal.

            In Marriage of Joe and Lee, Case No. H047392 (6^th Dist., January 7, 2022) (unpublished), the trial court awarded wife $2,520 in Family Code § 271 sanctions for attorney fees she incurred in defending against a set-aside motion brought by husband – finding husband’s set-aside motion was submitted without supporting factual or legal basis. Additionally, the trial court denied husband’s request for section 271 and Code Civ. Proc. § 128.5 sanctions against wife and her attorney due to husband’s failure to satisfy procedural prerequisites and to substantiate his claims.  Husband appealed, but the Sixth District affirmed.

            As to the § 271 sanctions awarded to wife, the panel found no abuse of discretion. Husband failed not only to provide meaningful argument or legal authority to support his claims of trial court error, but also failed to provide the panel with a record on appeal that would allow review of the chain of events underlying his claim of error by not including the set-aside motion nor the documentation for the underlying fees and costs order he sought to set aside. As the panel explained, “a conclusory assertion of error is inadequate to satisfy the appellant’s burden to establish prejudicial error warranting reversal and will not prevail on appeal.” (Jameson v. Desta, 5 Cal.5th 594, 608–609 (2018); Ewald v. Nationstar Mortgage, LLC, 13 Cal.App.5th 947, 948 (2017).)

            With regard to the $100 million husband sought in sanctions, plus another $5 million in punitive damages, against wife and her attorney for bad faith behaviors, perjury, forgery, and libeling and defaming husband, the appellate panel found the trial court’s decision was “amply” supported by the record. Husband’s sanctions request, embedded in a responsive declaration to wife’s motion for sanctions failed to comply with the “safe-harbor” Code Civ. Proc. § 128.7(c)(1) provision, and exhibits attached to his responsive declaration did not support his allegations.

Consumer Statutes, Section 998: Because Defense Section 998 Offers Were Valid, Trial Judge Had To Restudy Costs And Fee Rulings To Determine If The First Defense Offer Was In Good Faith

Costs And Fee Awards Will Have To Be Reexamined.

            In Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022) (unpublished), an automaker was found liable to the vehicle owner for $48,416 under a Song-Beverly Act lemon law case.  However, earlier, automaker made two separate CCP § 998 offers for $51,000 two months after the lawsuit was filed and $145,000 three weeks before trial, containing terms that plaintiff claimed were ambiguous and vague (to be discussed) even though both offers indicated that pre-acceptance fees and costs would be determined on a noticed motion if the parties could not agree to those amounts plus the base sums and the case would be dismissed rather than entry of judgment.  After plaintiff obtained some costs and significant attorney’s fees, the defense appealed and obtained a reversal with instructions on remand.

            The 2/7 DCA decided that the prior 998 offers were valid, except that the lower court needed to decide whether the first offer was premature/not made in good faith, which was not fully borne out by the record below.  However, in so doing, here are the takeaways from the appellate court, which diverged from lower court rulings as to ambiguity in the two offers:

• • • Post-offer fees not addressed. No way.  The offer quoted language from Civil Code section 1794(d) under the lemon law scheme, such that these fees were potentially in play.
    • Prejudgment/postjudgment interest not addressed. The offer was definite enough for plaintiff to assess whether prejudgment interest had to be factored in (with the lower court denying this ultimate request).  As far as postjudgment interest, the offer indicated there would be only a dismissal such that this type of interest was a “no.”
    • Failure to specify whether defendant would require a separate release. The offers did not include a release requirement, plus, any release would be limited to the claims in the case.
    • Failure to include an express good faith provision. Plaintiff offered no authority for why an offer had to include a good faith settlement provision.
    • Lack of specific payment date. Although cases had decided that the lack of a specific payment date is not an uncertainty, plaintiff controlled when the dismissal would be entered and a fee motion prosecuted, which prevented gamesmanship by the defense.
    • Lack of vehicle surrender date. Although having superficial appeal, plaintiff had plenty of information to evaluate whether to take the offer even if there was some delay on this issue.

Because factual issues remained on whether the first 998 offer was valid, the matter was remanded with instructions on what to do with respect to costs and fees depending as to how the trial judge ruled on whether the first offer was premature and not a good faith offer.  This meant that a costs/fee award to plaintiff of around $251,000 went away depending on what happened on remand, which might mean no fees to plaintiff and some costs to defense as the prevailing party.  BLOG CONCLUSION—uncertainty, uncertainty!

Employment: $625,000 Fee Award To Prevailing Plaintiff Under California Family Rights Act Affirmed On Appeal

Lower Court Correctly Awarded Lodestar Fees And Properly Denied The Multiplier Request.

            The California Family Rights Act allows eligible employees to attend to family serious health conditions and bond with a newly born child.  Government Code section 12965(b)(6) allows a trial judge discretion to award attorney’s fees to a prevailing plaintiff, much like the FEHA shifting fee statute.

            In Monterroso v. Hydraulics International Inc., Case No. B299946 et al. (2d Dist., Div. 1 Jan. 4, 2022) (unpublished), plaintiff won a jury verdict under both the California Family Rights Act and FEHA, even though the FEHA interactive process verdict was reversed on appeal.  However, given that the damages under both statutes were the same, the fee entitlement was the same such that a lower court award of $625,000 in attorney’s fees was at issue, a little lower than a lodestar request of $692,616 and also factoring in a denial of a positive 2.0 multiplier request.

            The 2/1 DCA affirmed the award as being no abuse of discretion.  Although there might have been less than across-the-board success, the claims were so related such that the reduced lodestar fee award was not erroneous.  With respect to the multiplier denial, the trial judge could conclude that the hourly rates requested were sufficient to encompass contingency risk so that no further augmentation was necessary. 

Damages, Section 1717: In Malpractice Case For Missed Appeal, Borrowers Recovered Only A Portion Of Fees Paid To Trustee Because Trustee Was Entitled To Recovery Under § 1717 Such That The Additional Fees Were Not Chargeable Against Malpractice Defendant

Case-Within-Case Malpractice Principles Drove The Result.

            As our last post for 2021, we discuss fee recovery as damages in an interesting legal malpractice case, Thompson v. Flynn Riley Bailey & Pasek, LLP, Case No. A161238 (1^st Dist., Div. 4 Dec. 30, 2021) (unpublished).

            What happened in this one was that borrowers received some recovery against their attorneys for failing to timely appeal a merits judgment in favor of a deed of trust trustee, which resulted in the recovery of some compensatory damages and $105,320 out of $600,000 in attorney’s fees paid to the prevailing trustee in prior litigation.  However, borrowers claimed that they should be entitled to about $500,000 more in fees which they paid to the trustee in a settlement, a request denied by the trial judge.  The parties on appeal agreed that the answer to this question rested on whether trustee could have recovered Civil Code section 1717 prevailing party fees—if so, the $500,000 in fees as additional damages were not proper.

            The 1/4 DCA affirmed the denial of awarding more fees as damages.  Based on borrowers contending that loan documents were an integrated contractual transaction, there were contractual fee clauses which allowed fee recovery to the trustee if it had prevailed.  It did not matter what the merits of the theory were, because a hypothetical recovery under section 1717 is all that is needed.

Year In Review – 2021

Year End-Wrap Up By Mike, Marc, And Shanna For Our Top 20 Decisions In 2021

Ronald Reagan Federal Courthouse, Santa Ana, California. Carol M. Highsmith, photographer.  Between 1980 and 2006. Library of Congress.

Part 2 of 2 – Third-Party Beneficiary Fee Clause Interpretation, Class Actions/Cy Pres Awards, Post-Judgment Fee Amounts, And Civil Rights/Employment Costs Dominated Our Second List Of Decisions.

            Here is the second part of our Top 2021 list.  With that, we look forward to posting on cases in 2022, although we will do periodic reports for any ending 2021 decisions.

10.     INTERPRETATION OF FEE CLAUSES. Hom v. Petrou, 67 Cal.App.5^th 459 (Cal. App. 1^st Dist., Div. 4 Aug. 3, 2021)—authored by Justice Brown, discussed in our Aug. 6, 2021 post—Where non-signatory lenders obtained a dismissal of a cross-complaint involving tort claims, they were entitled to attorney’s fees under a broad fee clause in a lease where they were third-party beneficiaries under the clause (based on the specific wording of the fees provision). 

9.     CIVIL RIGHTS/COSTS. Pollock v. Tri-Modal Distrib. Services, Inc., 11 Cal.5^th 918 (Cal. Supreme Court July 26, 2021)—authored by Justice Liu, discussed in our Aug. 2, 2021 post:  Routine appellate costs cannot be awarded to a prevailing FEHA defendant, even on appeal, where the plaintiff brought a potentially meritorious suit that ultimately did not succeed. 

8.     CLASS ACTIONS. McKinney-Drobins v. Massage Envy Franchising, LLC, 16 F.4^th 594 (9^th Cir. Oct. 20, 2021)—authored by Circuit Judge Gould, with a concurrence by Circuit Judge Miller, discussed in our Oct. 21, 2021 post:  Determination of whether vouchers are “coupons” under CAFA is reviewed under a de novo standard, reversing a district judge’s analysis under this review standard.  Class counsel fee award, reached at a pre-certification settlement stage, was reversed and remanded based on the presence of non-cash relief, a “clear sailing” provision, and a “reverter” to the defendant, as well as a need to examine actual redemption rates given that this was a coupon settlement case.

7.     COSTS/EMPLOYMENT. Patterson v. Superior Court, 2021 Cal.App. LEXIS 863 (Cal. App. 2d Dist., Div. 7 Oct. 18, 2021)—authored by Presiding Justice Perluss, discussed in our Oct. 20, 2021 post:  Employer successfully moving to compel arbitration in FEHA case not entitled to recover attorney’s fees unless employee’s opposition to the motion was groundless.

6.     SECTION 998/WORKERS’ COMPENSATION. Oakes v. Progressive Transp. Services, DJDAR 11710 (Cal. App. 2d Dist., Div. 2 Nov. 10, 2021)—authored by Justice Chavez, discussed in our Nov. 11, 2021 post:  Reconciling CCP § 998 and Labor Code § 3856, plaintiff’s attorney’s contingency fee amount is not to be reduced from gross judgment to determine if the section 998 offeror was entitled to prevailing party post-offer costs; CCP § 998 took precedence over Labor Code § 3856.

5.     REQUESTS FOR ADMISSION. Spahn v. Richards, Case No. A159495 (Cal. App. 1^st Dist., Div. 3 Nov. 30, 2021)—authored by Justice Rodriguez, discussed in our Dec. 5, 2021 post:   CCP § 2033.420 “costs-of-proof” sanctions are not per se barred by previous denials of a summary judgment motion and a directed verdict motion, with the circumstances of a particular case determining if a denying plaintiff’s conduct fell within section 2033.420’s exceptions.

4.     JUDGMENT ENFORCEMENT/REASONABLENESS OF FEES. Wertheim, LLC v. Currency Corp., 2021 Cal.App. LEXIS 854 (Cal. App. 2d Dist., Div. 1 Oct. 14, 2021, mod. Nov. 21, 2021, pet’n for review pending, Case No. S271933)—authored by Justice Chaney, reviewed in our Oct. 17, 2021 post:  Judgment creditor was denied a substantial portion of post-judgment collection attorney’s fees based on proportionality and equitable principles by comparing fees sought to amount of judgment at issue. 

3.     ATTORNEY GENERAL/PREVAILING PARTY. Doe v. Westmont, 60 Cal.App.5^th 753 (Cal. App. 2d Dist., Div. 6 Jan. 25, 2021, mod./published Feb. 8, 2021)—authored by Justice Tangeman, discussed in our Feb. 9, 2021 post:  Subsequent appellate decision can justify later CCP § 1021.5 fee award although pre-appeal fees were initially denied because success element was later satisfied.

2.     DAMAGES. Mai v. HKT CAL, Inc., 66 Cal.App.5^th 504 (Cal. App. 4^th Dist., Div. 1 July 12, 2021), rev. den.—authored by Justice Dato, discussed in our July 19, 2021 post:  Disagreeing with, or claiming some of its reasoning was dicta in, Copenbarger v. Cerullo World Evangelism, Inc., 29 Cal.App.5^th 1 (2018).  4/1 DCA holds a prima facie case that costs were incurred and that they were reasonable can be established by plaintiff client’s testimony that the bills were paid when fees are claimed as damages during a trial.  [BLOG OBSERVATION:  This split in thinking may need to be resolved by the California Supreme Court at some point.]

1.     CLASS ACTIONS/CY PRES AWARDS. In re Google Inc. Street View Electronic Communications Litig., Case No. 20-15616 (9^thCir. Dec. 27, 2021) (published)—majority and concurring opinions authored by Circuit Judge Bade, discussed in our Dec. 28, 2021 post:  Cy pres awards could be considered for purposes of valuing a class action for purposes of setting an attorney’s fees benchmark even though direct monetary payments went to class members in a case where member identification was difficult, with the concurrence indicating that the Ninth Circuit should reexamine cy pres awards with respect to indirect benefit and inherent conflicts of interest.

Equity, Retainer Agreements: Attorney Security Agreements For Fees Can Take Precedence Over Charging Orders

Matter Remanded To Determine Scope Of Security Agreement.

            We commend that all attorneys, with respect to collection of fees, read Rice v. Downs, Case No. B307780 (2d Dist., Div. 1 Dec. 27, 2021) (partially published) where the Court of Appeal, with some remand limited instructions, did seem to validate a security agreement/ UCC-1 filing for fee compensation as against a later charging order.  Lien priorities did govern here, but the opinion is good reading on how to perfect and obtain priority for purposes of fee recovery against competing creditors.

Probate: Award Of Fees To Trustee’s Attorneys Was No Abuse Of Discretion Where They Were California Bar Members, But Their Law Firm Was Not California Registered

Disqualification Based On Law Firm Registration Would Be Too Harsh.

            In Johnson v. Johnson, Case Nos. C090195/ C090522 (3d Dist. Dec. 27, 2021) (unpublished), trustee’s attorneys were awarded fees for beneficiaries making a bad faith contest of accountings.  On appeal, the aggrieved parties argued that the fee award was improper because the law firm for the winning attorneys was not registered in California.  That was true, but the individual attorneys were California state bar members, good enough to make an award justifiable.  (See Frye v. Tenderloin Housing Clinic, Inc., 38 Cal.4th 23, 48-50 (2006) [concluding that requiring disgorgement of fees by non-profit defendant because of failure to register is disproportionate to the wrong and “would constitute a totally unwarranted windfall” to plaintiff]; Olson v. Cohen, 106 Cal.App.4th 1205, 1215 (2003) [“To require disgorgement of fees because of a failure to register the corporation . . . is disproportionate to the wrong”].)

Class Actions: Ninth Circuit Affirms 25% Class Action Fee Award Based On Cy Pres Payments/Injunctive Relief Settlements

Majority Author Affirms The Settlement, But—In A Concurrence—Writes It Is Time To Reconsider The Practice Of Cy Pres Awards.

            In In re Google Inc. Street View Electronic Communications Litig., Case No. 20-15616 (9^th Cir. Dec. 27, 2021) (published), the Ninth Circuit affirmed a district judge’s approval of a settlement in a 60-million member class action alleging that Google illegally collected members’ Wi-Fi data through its Street View program.  The parties reached a settlement involving injunctive relief, cy pres payments totaling $13 million to 9 Internet privacy advocacy groups, attorney’s fees to class counsel amounting to 25% of the settlement fund, and class representative service awards—but no direct monetary payments to class members based on the difficulty in determining distribution of funds to such a large class and the technical challenges to verifying class members’ claims.  The district judge approved the settlement, which was affirmed by the Ninth Circuit in a majority opinion authored by Circuit Judge Bade, who also penned a concurring opinion.

            The Court of Appeals rejected the argument that the district judge “blindly applied” a 25% benchmark for the fee award, determining cy pres payments could be considered a tangible settlement value and augmented by the tangible benefit from the injunctive relief.  However, Judge Bade in a concurrence did indicate that the Ninth Circuit should revisit the propriety of cy pres awards based on commentary indicating that it does not provide an indirect benefit to class members and that it is rife with conflicts between class members, class counsel, and the third party beneficiaries of the actual monetary distributions. 

Year In Review - 2021

Year End-Wrap Up By Mike, Marc, And Shanna For Our Top 20 Decisions In 2021

Courtroom One Marble, James R. Browning U.S. Court of Appeals Building, San Francisco, California. Carol M. Highsmith, photographer. 2009. Library of Congress.

Part 1 of 2 – Section 998, Class Action, Prevailing Party/Fee Reasonableness, And Civil Rights/Employment Costs Dominated Our First List Of Decisions.

            It is the Holiday season, and we continue our tradition to present our personal favorite decisions from our blog postings during 2021, keeping in mind they are simply a distillation of what we selectively picked as important.  2021, although a challenging year due to the continuation of the COVID-19 pandemic, produced a good amount of California state court and Ninth Circuit decisions on fee issues, like 2020, such that we wrap up with our Top 20 Decisions list.  We wish our readers Happy Holidays, hoping you all stay safe.

20.     SECTION 998/SETTLEMENT. Varney Entertainment Group, Inc. v. Avon Plastics, Inc., 61 Cal.App.5^th 222 (Cal. App. 4^th Dist., Div. 3 Feb. 23, 2021)—authored by Justice Goethals, discussed in our Feb. 27, 2021 post:  A second narrower non-998 settlement offer, which was accepted by plaintiff, extinguished a broader initial section 998 offer made by plaintiff such that defendant could not recover prevailing party fees and costs under the extinguished prior 998 offer.

19.     ETHICS/INTEREST/RETAINER AGREEMENTS. Pech v. Morgan, 61 Cal.App.5^th 841 (Cal. App. 2d Dist., Div. 3 March 11, 2021)—authored by Justice Egerton, discussed in our March 13, 2021 post:  For valid non-contingency retainer agreements, unconscionability guides fee entitlement, and reasonability guides attorney performance issues.  Attorneys cannot obtain interest on delinquent fees unless their retainer agreements have provisions stating interest will be charged.

18.     REASONABLENESS OF FEES. Karton v. Ari Design & Construction, Inc., 61 Cal.App.5^th 734 (Cal. App. 2d Dist., Div. 8 March 9, 2021)—authored by Justice Wiley, discussed in our March 10, 2021 post:  Overlitigation of a case by an attorney and incivility during the course of a case can justify a trial court’s reduction of a prevailing party fee request.

17.     SECTION 998. Mostafavi Law Group, APC v. Larry Rabineau, APC, 61 Cal.App.5^th 614 (Cal. App. 2d Dist., Div. 4 March 3, 2021)—authored by Justice Currey, discussed in our March 5, 2021 post:  Section 998 offeror’s failure to provide acceptance line in an actually accepted 998 offer still invalidated the offer.

16.     CIVIL RIGHTS/COSTS. Rodney Green, Sr. v. Mercy Housing, Inc., 991 F.3d 1056 (9^th Cir. March 19, 2021)—authored by Circuit Judge Berzon, discussed in our March 19, 2021 post:  Losing plaintiff under a Fair Housing Act (FHA) case is not exposed to routine costs unless plaintiff’s claims were frivolous, unreasonable, or groundless under the Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978) standard.

15.     CLASS ACTIONS. Briseno v. Henderson (ConAgra Foods, Inc.), 998 F.3d 1019 (9^th Cir. June 1, 2021)—authored by Circuit Judge Lee, discussed in our June 1, 2021 post:  Ninth Circuit will use the factors in In re Bluetooth Headset Products Liab. Litig., 654 F.3d 535 (9^th Cir. 2011) to judge the fairness of class action settlement fee recovery terms at the post-certification stage, reversing a $7 million fee/costs award to class counsel because (a) class counsel was going to receive about 90% of the total non-cash redemption distributions; (b) the defense banked on a low redemption rate such that the “clear sailing clause” indicated some collusion; and (c) the settlement contained a “reverter” where any reduced fees to class counsel went back to defendant.

14.     PREVAILING PARTY. Harris v. Rojas, 66 Cal.App.5^th 817 (Cal. App. 2d Dist., Div. 8 June 20, 2021)—authored by Justice Wiley, discussed in our July 22, 2021 post:  Tenant, requesting $200,000 from a jury and receiving only $6,450 on his contract claim (3% of the request), was not the prevailing party so as to recover $296,744.68 in fees from landlord.  A trial judge has discretion to decide that the “victory” was pyrrhic and nobody won.

13.     CLASS ACTION. Kim v. Allison, 8 F.4^th 1170 (9^th Cir. Aug. 17, 2021)—authored by District Judge Rakoff sitting by designation for the majority over a dissent by Circuit Judge Callahan, discussed in our Aug. 17, 2021 post—Bluetooth factors are used to judge the fairness of a pre-certification fee award to class counsel.  The majority reversed a $1.2 million fee award, where the injunction value and coupon claim rate predicates for the fee award were inflated and where there was a suspicious “clear sailing clause,” with the dissenting judge finding the fee award was justified under a lodestar analysis such that there was no abuse of discretion.

12.     FAMILY LAW. Marriage of Erndt v. Terhorst, 59 Cal.App.5^th 898 (Cal. App. 1^st Dist., Div. 3 Jan. 11, 2021)—authored by Justice Petrou, discussed in our Jan. 13, 2021 post:  Family Code section 271 sanctions must be tethered to actual attorney’s fees incurred, so they cannot be awarded for an in pro per litigant’s efforts.

11.     SLAPP. Trinity Risk Management, LLC v. Simplified Labor Staffing Solutions, Inc., 59 Cal.App.5^th 995 (Cal. App. 2d Dist., Div. 8 Jan. 11, 2021 issued as unpublished, Jan. 14 published)—authored by Justice Stratton, discussed in our Jan. 15, 2021 post:  There is no meet and confer requirement to discuss the merits of a SLAPP motion or an attorney’s fees request under the anti-SLAPP statute.

Arbitration: Arbitration Award Of Attorney Fees And Costs To Prevailing Defendant Attorney Reversed On Appeal

Consumer Arbitration Rules Concerning Prevailing Party Attorney Fees Do Apply In The Context Of An Attorney-Client Dispute.

            In Milder v. Holley, Case No. B299122 (2d Dist., Div. 5 December 16, 2021) (unpublished), client plaintiff initiated arbitration proceedings pursuant to an arbitration clause after a dispute arose between him and his attorney/her law firm. After defeating plaintiff’s claims in arbitration, defendants attorney/law firm were awarded $59,892.50 in attorney fees plus $19,705.98 in costs – with the arbitrator determining defendants were the prevailing parties and entitled to  fees/costs incurred in the arbitration pursuant to the arbitration clause in the retainer agreement.  The trial court rejected plaintiff’s arguments that the retainer agreement’s fee-shifting provision was illegal – finding consumer arbitration rules do not apply to attorney fee disputes – and entered judgment confirming the arbitration award.

            The 2/5 DCA disagreed and reversed the fees/costs portion of the arbitration award. The panel concluded that the arbitrator acted in excess of his authority by awarding fees/costs against plaintiff because law firm clients are not excluded as “consumers” (Schatz v. Allen Matkins Leck Gamble & Mallory LLP, 45 Cal.4th 557, 564 (2009); Aguilar v. Lerner, 32 Cal.4th 974, 981 (2004)) and are therefore entitled to the consumer protections provided under Code Civ. Proc. § 1284.3(a) [“No neutral arbitrator or private arbitration company shall administer a consumer arbitration under any agreement or rule requiring that a consumer who is a party to the arbitration pay the fees and costs incurred by an opposing party if the consumer does not prevail in the arbitration, including, but not limited to, the fees and costs of the arbitrator, provider organization, attorney, or witnesses”].

Probate: Denial Of Attorneys’ Fees To Temporary De Facto Trustee Who Successfully Defeated Breach Of Fiduciary Claims Affirmed On Appeal

No Authority Entitling De Facto Trustees To Same Reimbursement Remedies As Designated Trustees.   

            In Sonntag v. Franz, Case No. A161466 (1^st Dist., Div. 1 December 16, 2021) (unpublished), defendant who temporarily acted as a de facto trustee sought attorneys’ fees and costs after successfully defeating breach of fiduciary duty claims brought by two of her siblings/trust beneficiaries.  Defendant claimed entitlement based on the trial court’s finding that she was the de facto trustee for six months. Although the trial court awarded defendant costs as the prevailing party, it denied her motion for fees.  The 1/1 DCA affirmed.

            Defendant argued on appeal that public policy supports the mutuality of remedies as it pertains to a de facto trustee – thereby entitling her to reimbursement for successful defense costs just as an appointed trustee would be – but provided no authority to support her contention.  In fact, the appellate panel was able to find only one case awarding fees against a trust to the de facto trustees – an Indiana case where the de facto trustees had been appointed by the U.S. District Court and had acted and been recognized as such for seven years before the 7^th Circuit Court of Appeals concluded the District Court had no jurisdiction to appoint trustees or administer the trust. (Gray v. Union Trust Co. (1938) 213 Ind. 675, 678; 14 N.E.2d 532.) However, that was a very different situation.  Here, as the panel observed, defendant was under no obligation to incur expenses on behalf of the trust. Rather, she should have looked to the designated trustee, who had requested she temporarily perform trustee duties on his behalf, to defend the trust against the siblings’ claims.

Family Law: Stipulated Judgment Not Mentioning Pending Sanctions Issues Did Not Deprive Family Law Judge Of Ability To Issue Family Code Section 271 Sanctions

Sanctions and Vexatious Litigant Issues Not Foreclosed By A Settlement Or Dismissal Via Settlement/Judgment.

            In Marriage of Patel and Bhatia, Case No. B307926 (2d Dist., Div. 3 Dec. 14, 2021) (unpublished), an ex-husband was sanctioned for $5,000 under Family Code section 271 [designed to penalize litigants not trying to settle or multiplying proceedings in a dissolution case] and declared to be a vexatious litigant.  Ex-husband had reached a stipulated judgment with ex-wife, with nothing mentioning the pending sanctions/vexatious litigant motions.  He appealed, arguing that the stipulated judgment/settlement deprived the lower court of ability to rule on the other pending requests, including the 271 sanctions motion.  The 2/3 DCA disagreed.  Adopting analogous reasoning from Pittman v. Beck Park Apartments Ltd., 20 Cal.App.5^th 1009 (2d Dist., Div. 7 2018), the appellate court determined that these post-dismissal issues could be entertained by the lower court, including the sanctions order.

            BLOB OBSERVATION—We now observe that a different division of the Second District has now endorsed the reasoning in Pittman.  We will note that the First District, Division 3, did so, earlier this year, in a published decision.  (Manhan v. Gallagher, 62 Cal.App.5^th 504, 510 (2021) [reviewed in our March 29, 2021 post].)

Section 998: Prevailing Defendant’s §998 Offer For 1.6% Of The Damages Request By Plaintiff Was Unreasonable

Denial of Defense Summary Judgment Motion And Trial Judge’s Remarks That Colorable Arguments Were Made For Interpretation Of An Easement Cemented The Result.

            The defendant in 18131 Ventura Blvd., LLC v. 5223 Linley, LLC, Case No. B307958 (2d Dist., Div. 7 Dec. 14, 2021) (unpublished) won an easement interpretation dispute but only after the trial judge denied summary judgment and remarked that plaintiffs made colorable arguments about the interpretation of the scope of the easement.  Two weeks after denial of the summary judgment motion and before a 9-day bench trial, defendant served a CCP § 998 offer for $10,000, about 1.6% of the damages claimed by plaintiff.  After winning at trial, defendant sought to recover $84,126.95 in costs ($28,250.22 of which was expert fees), with the trial judge finding the 998 to be unreasonable so as to preclude any expert fee award and ultimately awarding defendant $45,492.97 in routine costs.

            Defendant appealed, but the lower court’s ruling on the invalidity of the 998 offer was affirmed.  Given what occurred at the denial of the summary judgment ruling, the offer of only $10,000 was not reasonable, and the lower court was in the best position to so determine.