CALIFORNIA ATTORNEY'S FEES

Reasonableness Of Fees, Sanctions: 50% Fee Recovery Award To Prevailing Party Was No Abuse Of Discretion

Denial Of $16,060 Sanctions Fee Request Was No Error Because It Was An Interim Ruling Not Impacting The Litigant’s Eventual Prevailing Party Status.

            In Aquino v. Klein, Case No. B301186 (2d Dist., Div. 3 Apr. 8, 2021) (unpublished), a dispute between friends, who went into business and then had a falling out romantically, resulted in a close to decades in litigation by which one party prevailed against a trustee to the tune of $422,669.93.  The prevailing party then moved for an initial recovery of $458,007.63 in fees, later reduced to $386,355.02 after the trial court asked for justification.  (BLOG HINT:  Always bad when you backpedal around $35,000 in a fee request, given that fees motions are always about credibility.)  Ultimately, the lower court only awarded $192,000.50 in fees, about 50% of the reduced request.  Prevailing party appealed this as well as the denial of an interim order denying sanctions and a $16,060 sanctions request.

            The 2/3 DCA affirmed.  The interim sanctions award was not reviewed because it was intermediate and the prevailing party obtained relief later, such that it was not reviewable under Code of Civil Procedure section 906.  With respect to the $192,000.50 appeal in which the prevailing party argued the fee award was not enough, appellant could not hurdle the abuse of discretion standard, especially given that the lower court scrutinized things and wanted further justification.  Appellant argued that a more specific basis for the fee award was warranted, but only cited federal civil rights cases which did not govern the law with respect to private parties (where no statement of decision is required, generally, under state law). 

            Judge Salter, an Orange County Superior Court Judge, sitting by assignment, authored the 3-0 decision.

Section 998: Given That Contractual Principles Usually Govern Wording Of 998 Offers, Recent Rhode Island Case Offers Some Tips

Moral Of The Story Is To Craft Our 998 Offers Carefully As Far As Wording.

            We will tell you that Code of Civil Procedure section 998 offers, as far as substance, are usually subject to contract interpretation principles.   Although it comes from Rhode Island, we will share with you some insights from a decision which interpreted an offer of judgment provision which still has some instructiveness for drafting 998 offers in California.

            In Taylor v. Scott Motors, Inc., C.A. No. PC-2015-4284 (R.I. Super. Ct. Feb. 4, 2021), a simple consumer case turned into five years of litigation over a software update for a VW Jetta SportWagen TDI diesel station wagon between the car owner and dealership.  The dealership made an offer of judgment under Rhode Island Superior Court Rule Civil Procedure 68(a) [modeled under the federal rule] for a set sum, plus “the amount of costs (including reasonable attorney’s fees) incurred in connection with this action through the [offer] date hereof in an amount to be determined by the Court.”  Plaintiff accepted the offer, and then sought $256,000 in lodestar fees augmented positively by 20% for a total of $307,000.  The defense objected to the request based on the argument Plaintiff presented no evidence that she “incurred” any fees because she had no fee agreement with her counsel and had no legal obligation to pay them. 

            The defense arguments did not resonate.  The Rhode Island court ultimately determined that “incurred” simply meant that the counsel did the work; if defendant had wanted to make things clearer, it would best to replace the term “incurred” with “billed to and paid by Plaintiff,” clearer language which was missing and did not divest plaintiff of fee entitlement under the offer.

            Moral of the story:  be precise in drafting 998 offers; use “billed and paid by Plaintiff” rather than “incurred” if you want to narrow fee entitlement under pretrial offers.

Class Actions: Class Action Objector’s Objection To Class Action Fees Was Sustained Until True Value Of Vouchers And Coupons Could Be Determined

Pragmatic Valuation of Class Action Settlement Is Key In Voucher/Coupon Cases.

            Rael v. The Children’s Place, Inc., 2021 U.S. Dist. LEXIS 63117 (S.D. Cal. Mar. 31, 2021) is a situation where class action counsel’s fee award was denied without prejudice until the true value of a voucher and coupon settlement could be determined under the Class Action Fairness Act (CAFA).

            What happened here is that a retail store consumer class action was settled by which vouchers and coupons would be issued to the class members, with one voucher being good for $6 off a future purchase (no minimum purchase necessary) and a coupon good for a 25% discount on the first $100 of a purchase.  Plaintiffs moved for final approval of the settlement and $1.08 million in attorney’s fees and costs, which defendant agreed to pay separately.  The fee motion was based on a settlement fund of about $5.614 million, which assumed 100% of the vouchers would be redeemed at the $6-off level.  Defendant did not oppose the motion under a “clear sailing” provision, but an objector challenged the settlement based on the true value of the redemption of vouchers and coupons.

            District Judge Curiel sided with the objector for now.  The district judge determined, based on the circumstances, that the $6-off vouchers and 25% off coupons were coupons under CAFA.  As such, the award of attorney’s fees had to be delayed until the true amount of recovery was determined for the vouchers and coupons.

Fee Clause Interpretation, Landlord/Tenant: $93,913.85 Fee Award In Favor Of Residential Defendant Affirmed On Appeal

Conversion Claim Arose From The Lease, With Other Arguments Forfeited On Appeal.

            Where appellants fail to make arguments at the trial court level or in an appellant’s opening brief, they may be subject to having their challenges forfeited on appeal.  That largely happened in Ghannoum v. Sevier, Case No. B304026 (2d Dist., Div. 2 Apr. 7, 2021) (unpublished).

            Defendant tenant defensed a non-signatory residential property owner’s lawsuit based on damaging property in the premises after defendant was evicted.  The trial court awarded defendant $93,913.85 out of a requested $116,527.10 based on a lease attorney’s fees clause. 

            That result was affirmed on appeal.  Many of the arguments on appeal were dismissed because they were not raised at the trial court level or raised in appellants’ opening brief.  With respect to the gist of the claim, a conversion based on a contract can give rise to fee recovery, Mustachio v. Great Western Bank, 48 Cal.App.4^th 1145, 1151 (1996), which it did as far as triggering fee entitlement in this particular case.

Allocation, Deadlines: $172,000 In Trial/Appellate Fees To One Prevailing Defendant And $36,890 In Appellate Fees To Other Prevailing Defendants Affirmed On Appeal

Parties Orally Stipulated To A Postponement Of Appellate Fee Deadlines And Work Was Inextricably Intertwined.

            In Ebrahimpour v. Pasco, Case No. B303983 (2d Dist., Div. 2 Apr. 7, 2021) (unpublished), plaintiffs lost a corporate opportunity dispute where there was a memorandum of agreement with a contractual fees clause against multiple defendants.  On remand after a prior appeal, plaintiffs were hit with a $172,000 trial/appellate fees award against one defendant and another $36,890 appellate fees award against other defendants.  Plaintiffs’ appeal of the fee awards did not alter anything.  As far as timeliness in bringing appellate fee motions, the trial court’s conclusion that there was an oral agreement to extend the time deadline was affirmed on appeal.  (Obviously, it would be good to confirm these arrangements in writing, unfortunately, given modern litigation tendencies; however, the lower court did credit a declaration by one side as to what was stipulated to.)  There was no need to apportion time between the various defendants because it was impossible to do so given the overlap in facts and legal theories. 

Reasonableness Of Fees: In Liquidated Damages Dispute Won By Defendant, Trial Court’s Award Of $1,778,500 In Fees Under Contract Clause, About $350,000 Less Than The Request, Was No Abuse Of Discretion

Although Some Math Mistakes Were Made By Lower Court, Reduction Was Justified By The Record.

            In Micrel, LLC v. Zinn, Case Nos. A157136/A158069 (1^st Dist., Div. 1 Apr. 6, 2021) (unpublished), defendant won a battle over whether a nondefamation liquidated provision seeking $1.3 million in damages was reasonable.  The defense then sought $2,128,534.50 in contractual attorney’s fees for prevailing, with the lower court awarding $1,778,500—about a 16% reduction, prompting an appeal by the defense.  (Plaintiff also appealed on the merits of the liquidated damages clause being unreasonable, but that was affirmed on appeal.)

            The 1/1 DCA affirmed the fees award.  Although the math was a little off by the lower court, the record justified this reduction based on excessive paralegal work, $142,000 billed for work on sanctions/discovery motions which were withdrawn or denied by the lower court, and time preparing expert witnesses on issues which had been resolved.  The appellate court actually reconstructed time to show how the lower court mistakes still justified the reduction—given that the ultimate result was justified, actual fee award (reduced a bit) affirmed. 

Liens for Attorney Fees, Probate: 4/3 DCA Affirms Probate Court’s Denial Of Fee Petition By Attorney Who Represented Client In Civil Litigation Prior To Client’s Death

Client’s Death Did Not Transform Completed Civil Litigation Into A Probate Administration Task For Which The Probate Court Could Award Fees, Nor Did Client’s Death Waive Requirement That Attorney’s Charging Lien Had To Be Adjudicated.

            In Belcher v. Bakkers, Case No. G058893 (4^th Dist., Div. 3 April 5, 2021) (unpublished), attorney seeking payment of fees and costs, for services rendered in civil litigation prior to his client’s death, filed a petition for payment in probate court.  The trial court denied the petition – concluding the legal services were rendered before client’s death and were not services to the probate estate – and found the proper form for recovering fees owed to attorney from client’s estate was a creditor’s claim (a claim attorney had also filed, but was yet unresolved pending the appointment of a special administrator to the estate).

            Attorney appealed, but the 4/3 DCA, in a 3-0 opinion authored by Justice O’Leary, affirmed.

            Attorney’s argument that his fee petition was the proper mechanism for seeking fees because the trial court authorized fees payments to two other attorneys overlooked the fact that those fees were incurred by client’s conservator and guardian ad litem and were specifically authorized by Prob. Code § 2631(a).

            Attorney also argued, for the first time on appeal, that his contingency fee agreement with client created an attorney charging lien and the trial court’s conclusion that attorney had to file a creditor’s claim for payment of his fees/costs failed to consider his status as a lienholder.  However, an attorney charging lien is only effective if the attorney has filed an independent action – such as a declaratory relief action – to establish the lien’s amount and enforceability.  (Mojtahedi v. Vargas, 228 Cal.App.4th 974 (2014) [reviewed in our July 13, 2014 post].) Here, the lien’s amount and enforceability had not been adjudicated as client died before attorney was able to file a separate, independent action for such determination. As such, the proper avenue for adjudicating the lien’s amount and enforceability was for attorney to file a creditor’s claim.    

Deeds of Trust, Section 1717: Deed Of Trust Clause Allowing Fees To Be Added To Debt Did Not Create Civil Code Section 1717 Right To Fees In Favor Of Prevailing Borrower

2/1 DCA Followed Analysis In Hart and Chacker.

            In 8747 Shoreham, LLC v. Bank of New York Mellon, Case Nos. B294377/B296777 (2d Dist., Div. 1 Apr. 2, 2021) (unpublished), a decades-old real property dispute, owner obtained a default judgment against a deed of trust holder and then moved to recover attorney’s fees as prevailing party under a DOT clause and Civil Code section 1717.  The trial court denied the request, determining there was not a true fees clause so as to trigger section 1717.  The 2/1 DCA agreed, determining that the DOT clause only allowed for any fees to be added to the debt such that no section 1717 fee recovery was allowable.  In doing so, it relied upon the reasoning in Hart v. Clear Recon Corp., 27 Cal.App.5^th 322, 327 (2018) [reviewed in our Sept. 19, 2018 post] and Chacker v. JPMorgan Chase Bank, N.A., 27 Cal.App.5^th 351, 358 n. 6 (2018) [reviewed in our Sept. 20, 2018 post].  It also distinguished other cases where there was a separate prevailing party fees clause in a DOT which would have allowed for such recovery. 

In The News . . . . Massachusetts Supreme Judicial Court Enters Two-Year Suspension For BigLaw Partner Who Added Fictional Hours To Billings, Even Though She Did Excellent Work

The Math Did Not Add Up.

            As reported recently in the on-line version of the ABA Journal, a BigLaw partner in Massachusetts was suspended for 2 years after the Massachusetts Supreme Judicial Court found that she had added about $216,000 in fictional billings while at Saul Ewing, even though she did excellent work.  The court concluded that her explanations did not “add up”—she would have had to work 24 hours a day on 12 different dates to make the billings square, a proposition not found credible.

Judgment Enforcement: $118,148 In Postjudgment Enforcement And Appellate Fees Affirmed In Favor Of Prevailing Party

Many Of Appellant’s Challenges Foreclosed By Resolution In Prior Appeal Which Was Dismissed, With Remaining Challenges Not Surviving An Abuse Of Discretion Deferential Review Standard.

            In Locke Management Assn. v. Esch, Case Nos. C087137/C088192 (3d Dist. Apr. 2, 2021) (unpublished), defendant lost a right of first refusal challenge by plaintiff where there were contractual and Davis-Stirling Act fee shifting entitlement provisions.  She lost an earlier merits appeal of the lower court judgment and an award of about $150,000 in attorney’s fees to plaintiff (failing to raise fee entitlement challenges in the earlier appeal).  Sadly, she continued to fight, such that plaintiff moved for postjudgment enforcement and appellate fees of $118,148 for its further efforts in the case—which were granted.  (Plaintiff did a smart thing at the lower court level, only requesting $35,000 out of $54,028 in incurred appellate fees.)  She appealed again in the consolidated cases, but appellant lost again.  Appellant forfeited many arguments because (1) she failed to provide record citations, (2) she argued fee entitlement issues which should have been raised in the prior appeal or were implicitly decided in the prior appeal when it was dismissed, (3) she did not raise timely a failure by plaintiff to adhere to an ADR procedure by a demurrer at an earlier stage of the proceedings, and (4) the lower court’s amended judgment, one which included postjudgment fees, did not reopen earlier substantive determinations about fee entitlement.  

Employment: Appellate Court Refused To Award Appellate Fees To Three Prevailing Respondent Employees In Wage/Hour Overtime Case

Reason Was That Respondents Wanted 1.33 Positive Enhancement To The Lodestar Appellate Fee Request, Necessitating A Remand To The Trial Court To Determine Appellate Fees.

            In Frattini v. First American Title Co. of Napa, Case No. A158995 (1^st Dist., Div. 1 Mar. 30, 2021) (unpublished), three misclassified employees won a total of $414,743.80 against defendant, as well as mandatory costs and attorney’s fees of an undisclosed amount under wage/hour fee shifting provisions.  Defendant appealed the merits determination, but not the costs and fees awards.  The defense lost on appeal.  Respondent employees then requested appellate fees from the 1/1 DCA (which were also allowed under the wage/hour fee shifting provisions), but their greed may have got the better of them.  The appellate court remanded to the trial court given that employees asked for a 1.33 positive lodestar enhancement from the reviewing panel (which they received by the lower court).  The lower court was best to adjudge appellate fees in light of the enhancement request being added to the mix. 

Consumer Statutes: Reversal of Lemon Law Compensatory Damages Component For A Limited Restudy Also Required A Limited Re-Do On The Fee Award

$29,357.35 Lemon Law Fee Award May Need To Be Increased Somewhat On Remand.

            We have to say that appellate courts try to “telegraph” to litigants what needs to be done when there is a limited remand where fee recovery is involved.  That is what happened in Crayton v. FCA US, LLC, Case Nos. B294528 et al. (2d Dist., Div. 5 Mar. 30, 2021) (partially published; fee discussion not published).

            Plaintiff won $86,953 in a car lemon law case.  He then sought $142,183.50 in fees under the Song-Beverly Act, but the trial judge awarded only $29,357.35 based on the fees incurred before the defense admitted liability.  The 2/5 DCA reversed the compensatory award, because plaintiff was entitled to some registration renewal and insurance fees as part of the lemon law compensatory award.  That meant that the fee recovery had to be reversed, with the appellate court signaling that the remand consideration should focus on the increased fees incurred to obtain any further compensatory damages and maybe something for winning on appeal. 

Family Law: Grandfather In Custody Battle With Grandson’s Father Loses Appeal Of Trial Court’s Orders That He Pay Needs-Based Attorney Fees Of $66,820 For Father’s Attorney, Plus An Additional $137,010 For Grandson’s Court-Appointed Attorney

Grandfather, Who Paid Almost $500,000 To His Own Attorneys, Stipulated That He Could Afford To Pay Any Reasonable Amount Of Attorney Fees – Even Into The Hundreds Of Thousands Of Dollars – While Father’s Income & Expense Declarations Indicated A Monthly Income Of Only About $2,100.

            After his daughter’s health deteriorated, grandfather stepped in her place in a highly contentious custody battle against grandson’s father – with grandfather seeking nonparent custody of grandson in Robert I. v. Alisa B., Case No. A157943 (1^st Dist., Div. 2 March 29, 2021) (unpublished).  Trial did not go grandfather’s way and the trial court awarded custody to grandson’s father.  On appeal, however, grandfather contested only the trial court’s orders on attorneys’ fees.

            The trial court, before trial, had ordered grandfather to advance $10,000 in attorney fees to father under the provisions of the Uniform Parentage Act (Family Code § 7600, et. seq.), plus another $25,000 through a later interim order, due to the disparity between grandfather’s and father’s ability to retain counsel.  Finally, in its statement of decision, the trial court ordered grandfather to pay father’s attorney fees of $31,820 and granted grandson’s court-appointed counsel’s motion for an order requiring grandfather to pay his fees – to the tune of another $137,010.

            As to the fee awards to father, grandfather argued that the trial court lacked authority to award the initial $10,000 because father had not requested fees and had also failed to file a current Income and Expense Declaration at that point.  Grandfather also argued that the trial court abused its discretion in ordering the interim award, and the final award at the conclusion of trial because the Income and Expense Declarations filed by father at those times were deficient. 

            Moving to his challenges to the fee award to grandson’s court-appointed counsel, grandfather argued that the trial court had acted in excess of its jurisdiction by awarding the fees without complying with statutory requirements, and had erred by failing to analyze the parties’ financial circumstances in making the award.

            The 1/2 DCA affirmed.  The trial court had properly issued an order to show cause (Fam. Code § 7605(e)) and considered the sworn testimony of father regarding his income before making the initial order.  As to the remaining awards to father, grandfather cited no authority suggesting legal error to award attorney fees in the absence of a perfect Income and Expense Declaration.  As to the fees awarded to grandson’s counsel, the panel found that it would have been preferable for the trial court to have determined reasonable compensation sooner, but that California Rules of Court, Rule 5.241(a)(1)(B) allowed the trial court to make that determination at the time it determined the parties’ ability to pay.

            In the end, father’s monthly income was approximately $2,100, while grandfather had stipulated that that he could pay any reasonable amount of fees, even into the hundreds of thousands of dollars, and had paid his own attorneys just shy of $500,000.  With the purpose behind an award of attorney’s fees, pursuant to the Uniform Parentage Act, being to level the playing field and insure each party has access to legal representation, the panel found no error, nor abuse of discretion.

 

Prevailing Party, Reasonableness Of Fees: Two Prevailing Party Fee Awards – Totaling $609,180 – To Plaintiff Assignee Attempting To Enforce Prior Judgment Affirmed On Appeal

Original Judgment Creditor Had Satisfied Mediation Requirement In The Parties’ Fees Provision, And Defendants Failed To Raise Their Challenges To Specific Billing Entries Before The Trial Court Despite A Continuance To Allow Them To Do So.

            Plaintiff buyer entered into a Purchase Agreement with defendant sellers for the purchase of sellers’ home.  The Purchase Agreement contained an attorney fees provision allowing the prevailing party to obtain fees if that party had mediated before filing a lawsuit.  When sellers tried to back out of the sale, buyer sued – obtaining a judgment that included attorney fees. 

            Seven years later, buyer assigned his interest in the judgment to his son who filed a new lawsuit against sellers to enforce the judgment.  Sellers unsuccessfully sought bankruptcy protection, and another judgment was entered against them two years later – ordering them to convey the home and to pay interest on the original judgment.  Sellers then unsuccessfully appealed the new judgment and the order granting interest.  Afterward, the parties returned to the trial court where son was awarded attorney fees based on the fee provision in the Purchase Agreement – $524,149.50 for fees incurred in non-bankruptcy proceedings, and $85,030.50 for fees incurred in sellers’ attempted bankruptcy.

            Sellers appealed in Ko v. Liang, Case No. B300550 (2d Dist., Div. 8 March 26, 2021) (unpublished) – raising two challenges to the fees awards.  First, sellers argued son was not entitled to fees because he had failed to mediate before filing the lawsuit.  Second, sellers claimed son had not met his burden of proof as to the amount of fees incurred in the bankruptcy proceedings.

            The 2/8 DCA affirmed.  The panel found the mediation requirement had been met because fees were awarded in the original judgment and sellers raised no issue regarding entitlement at that time.  As to the burden of proof regarding the reasonableness of fees incurred in the bankruptcy proceeding, the panel concluded that burden had shifted to sellers once the trial court had awarded the fees.  The trial court had continued the hearing on son’s request for fees to allow sellers to brief specific bases for reducing the fees, but they failed to do so, and sellers’ appellate briefing including asserted examples of inappropriate billing entries was “too little too late.”  Sellers failed to meet their burden of proof on appeal.  

Arbitration, Prevailing Party: $10,000 Attorney Fees Award To Prevailing Party On Motion To Vacate Arbitration Award Reversed On Appeal

The Parties’ Note Contained An Attorney Fees Provision, But Their Arbitration Agreement Did Not, And A Motion To Vacate An Arbitration Award Is Not An Action On A Note.

            In Bilodeau v. Modern Mobile Homes, Case No. B302791 (2d Dist., Div. 6 March 29, 2021) (unpublished), plaintiff buyers entered into an agreement for the purchase of a remodeled mobile home with defendant seller.  Seller financed buyers’ balance owed for the purchase by taking buyers’ note which was secured by a security agreement in the mobile home.  The note contained an attorney’s fee provision, but the purchase agreement – which included an arbitration clause – did not.

            When a dispute arose between the parties regarding structural issues, buyers invoked arbitration – seeking damages and rescission of the purchase transaction.  After the arbitrator awarded buyer’s $45,000 down payment to seller, declared buyers’ note would be cancelled upon return of the mobile home to seller, and did not award attorney fees, buyers moved unsuccessfully to have the trial court vacate the arbitration award.

            After denying buyers’ motion, the trial court, based on the attorney fee provision in the note, awarded seller $10,000 of its requested $21,000 as the prevailing party in the motion to vacate – a result reversed by the 2/6 DCA. 

            Because the arbitration agreement did not provide for an award of attorney fees, Code Civ. Proc. § 1284.2 precluded such an award.  Although the trial court awarded the fees under the fees provision contained in the parties’ note, a motion to vacate an arbitration award is not an action on a note.

Discovery, Sanctions: 1/3 DCA Affirms Trial Court’s Order, Entered After Plaintiffs Voluntarily Dismissed The Case, Setting Aside Monetary Sanctions Previously Imposed Against Defendant For Discovery Abuses.

Exceptions To The General Rule That Deprives Trial Courts Of Jurisdiction Following Voluntary Dismissal Of A Case Allow Trial Courts To Retain Jurisdiction To Determine And Enforce Collateral Statutory Rights – Such As Motions For Sanctions.

            In Manhan v. Gallagher, Case No. A158152 (1^st Dist., Div. 3 March 26, 2021) (published), plaintiffs filed motions to compel for further discovery responses and obtained monetary sanctions against defendant for discovery violations.  In support of their motions, plaintiffs’ counsel submitted a declaration stating his billing rate in the matter was $300 per hour.  Plaintiffs later dismissed their lawsuit against defendant without prejudice. On the same day, defendant filed a motion for reconsideration or to have discovery sanctions imposed against her set aside based on a declaration filed by plaintiffs’ lead attorney stating plaintiffs had incurred no legal fees and had been represented pro bono in their case against defendant. 

            It turned out that the associate attorney who filed the declaration claiming a $300 hourly billing rate for his work on the lawsuit was unaware that the firm had taken the case pro bono in light of plaintiffs’ long-standing relationship with the firm. 

            After the trial court granted defendant’s request and set aside the monetary sanctions imposed against her, plaintiffs appealed – arguing that the trial court lacked jurisdiction to consider and set aside the previously imposed sanctions following plaintiffs’ voluntary dismissal of the action.

            The 1/3 DCA affirmed – citing Pittman v. Beck Park Apartments Ltd., 20 Cal.App.5th 1009, 1022-1024.  While, as a general rule, voluntary dismissal of a case deprives the trial court of both subject matter and personal jurisdiction in that case, a number of exceptions have been carved out allowing a trial court to retain jurisdiction postdismissal and postjudmgent to determine and enforce collateral statutory rights – such as motions for sanctions. Further, the panel found no sound basis in logic or public policy to deny a remedy to a party burdened with sanctions obtained through misrepresentation (whether or not intentional) simply because a plaintiff dismisses an action – that disallowing reconsideration in cases such as this, where sanctions are based on misrepresentations, violates a reasonable sense of justice and fair play.

Appeal Sanctions, Private Attorney General: 4/1 DCA Denies Requests For Appeal Sanctions And Private Attorney General Fees To Derivative Action Plaintiffs That Were Successful In Proving Former President/CEO’s Breach Of Fiduciary Duty

Although Unsuccessful, Former President/CEO’s Arguments On Appeal Were Not Objectively Without Merit So As To Rise To The Level Of Frivolity Justifying Sanctions, And Plaintiffs Forfeited Their Claim To § 1021.5 Private Attorney General Fees By Not Making It Before The Trial Court.

            In A&B Market Plus, Inc. v. Arabo, Case No. D073850 (4^th Dist., Div. 1 March 25, 2021) (unpublished), members or former members of a non-profit benefit corporation/trade association for independent retail convenience stores (Association) filed a derivative action against Association, its former President and CEO, and its treasurer and secretary.  Plaintiffs sought removal of former President/CEO and treasurer/secretary from Association’s board of directors, disgorgement of at least $463,322.63 obtained through alleged misdeeds, and other damages for tax evasion and lost business opportunities.  The trial court returned a defense judgment for treasurer/secretary, but concluded, among other things, that former President/CEO had breached his fiduciary duty and had to return to Association a $210,000 bonus paid to him based on former President/CEO’s false representation concerning his involvement in a real estate deal for Association.

            Former President/CEO unsuccessfully appealed the trial court’s ruling concerning the $210,000 bonus.  However, in a cross-appeal, plaintiffs sought sanctions against former President/CEO for pursuing a frivolous appeal and, alternatively, sought to recover attorney’s fees under Code Civ. Proc. § 1021.5. 

            The 4/1 DCA denied both requests.  Former President/CEO’s appeal did not rise to the level of frivolity so as to warrant sanctions under Code Civ. Proc., § 907 or under Cal. Rules of Court, Rule 8.276(a)(1).  Although the panel determined former President/CEO’s arguments on appeal lacked merit, those arguments were not objectively devoid of any merit.  As to the § 1021.5 fees request, plaintiffs forfeited this claim by not making it before the trial court.

            Finally, pursuant to Cal. Rules of Court, Rule 8.276(a)(3), former President/CEO sought monetary sanctions against plaintiffs and their appellate counsel for filing plaintiffs’ sanctions motion.  However, because he made the request in an opposition brief instead of properly serving and filing a separate motion, the request was denied.

Discovery, Sanctions: Continued Deficiencies In Discovery Responses Resulted In Monetary And Evidentiary Sanctions Against Self-Represented Plaintiff, And Ended In Terminating Sanctions.

Affirmance Of The Terminating Sanctions Mooted Plaintiff’s Appeal Of The Trial Court’s Order Sustaining Defendants’ Demurrers And Motions To Strike.

            Following ten months of meet and confer correspondence, seven sets of amended discovery responses, and impositions of evidentiary and $8,000 in monetary sanctions, the trial court issued terminating sanctions with prejudice against self-represented plaintiff for his continued failure to correct persistent issues with his discovery responses.

            Plaintiff appealed in Soofi v. Contreras Law Firm, Case No. D076884 (4^th Dist., Div. 1 March 25, 2021) (unpublished) – alleging trial court bias and claiming his discovery deficiencies were the result of his misunderstanding of the discovery statutes – not willful noncompliance.  The 4/1 DCA affirmed – finding no abuse of discretion nor bias.  Plaintiff had been provided with ample time and opportunity to correct his errors of providing incomplete or nonresponsive information to defendants, and failed to meet his burden of showing the actual probability of bias by the trial judge.

            Because the panel affirmed the terminating sanctions – which the trial court issued with prejudice, resulting in the dismissal of the entire case – it did not reach plaintiff’s challenges to the trial court’s order sustaining defendants’ demurrers and motions to strike.

Appeal Sanctions, Civil Rights: 2/5 DCA Imposes Sanctions Against County Of Los Angeles For Frivolous Appeal Of Trial Court’s FEHA Fee Denial Based On Finding That Former Employee Plaintiff’s Claims Were Not Frivolous, Vexatious Or Unreasonable

Although The 2/5 DCA Initially Considered Imposing $8,500 Against County, It Ultimately Reduced The Appeal Sanctions To $900 Based On Contrition Shown By County’s Counsel.

            In Sepah v. County of L.A. Dept. of Mental Health, Case No. B297642 (2d Dist., Div. 5 March 25, 2021) (unpublished), former employee sued the County of Los Angeles, after termination of her position as a jail psychiatrist, claiming three FEHA violations for discrimination and retaliation, and other whistleblower retaliation and defamation claims.  The trial court summarily adjudicated the FEHA claims  and defamation claim in County’s favor and the remaining causes of action went in County’s favor at trial.  Afterward, County sought in excess of $500,000 in attorney fees and costs – an amount that included work performed on both FEHA and non-FEHA claims – pursuant to Gov. Code § 12965(b), which authorizes an award of fees to a prevailing FEHA defendant if plaintiff’s claims were frivolous or without foundation.  County appealed when the trial court denied its fee request in its entirety – expressly finding that Plaintiff’s action was not frivolous, vexatious or unreasonable.

            County’s appeal did not sit well with the 2/5 DCA.  County pursued the appeal despite the appellate panel’s decision on Plaintiff’s earlier appeal – wherein the 2/5 DCA reversed the trial court’s summary adjudication on Plaintiff’s defamation claim based upon its determination that Plaintiff had raised a triable issue of material fact, and further proceedings on that claim were warranted on remand.   Three months after the panel’s decision in Plaintiff’s earlier appeal, County filed its opening brief.  By that time, any question as to whether Plaintiff’s lawsuit had been filed without foundation had clearly been resolved.

            After the filing of respondent’s and reply briefs, the 2/5 DCA gave notice that it was considering $8,500 in sanctions against County for pursuing a frivolous appeal.  The panel found the County’s conscious disregard of the outcome from the earlier appeal and its “slapdash” briefing supported a finding that the appeal was frivolous – brought primarily for its vexatious effect.  However, because County’s counsel had shown contrition in response to the 2/5 DCA’s notice re appeal sanctions, the panel imposed only $900 in sanctions on its own motion.  (Cal. Rules of Court, Rule 8.276(a)(1).)

Fee Clause Interpretation, Section 1717: $795,728 Fee Award To Litigant Affirmed On Appeal Based On Broad Stock Purchase Agreement Fees Clause, But $926,170 Fee Request Properly Denied As Untimely As Well As Not Allowed Under Promissory Notes Fees Clause

In The End, This Dispute Was Driven By The Fee Clauses “Four Corner” Interpretation.

            Justice Fybel, as the authoring justice in Dohr v. Lintz, Case Nos. G056144/G058796 (4^th Dist., Div. 3 Mar. 24, 2021) (unpublished), was faced with consolidated appeals where a $795,728 fee award was trying to be sustained and where a $926,170 fee request was denied as untimely and not allowable under a promissory note fees clause.  In the end, all was affirmed but he (on behalf of his panel) steered through some interesting fee analytics.

            Litigant Dohr obtained a $795,728 fee award out of a requested $2,208,512.50.  The other side appealed, principally arguing it was a tort claim not recoverable under Civil Code section 1717 and was a derivative claim which at the most capped at the $50,000 bond limitation set forth in Corporations Code section 800.  The appellate court rejected the challenges to the fee award.  Although agreeing that tort claims are not recoverable under Civil Code section 1717, the fee clause under the stock purchase agreement, had to be independently assessed, and it was broad enough to allow fee recovery.  The aggrieved party Lintz argued that she could not be held liable on a derivative claim, but she—as a shareholder of the corporation—stood in its shoes such that she became a party to the stock purchase agreement and the $50,000 limitation did not apply in the context of this case where there were other fee entitlement bases.

            With respect to the denial of the $926,170 fee request, it was untimely, there was a dismissal of the note claim effectively (such that Santisas kicked in), and the tort allegations were not tethered to the note fees clause.  All things said, there was nothing wrong in denying this fee request.