CALIFORNIA ATTORNEY'S FEES

Family Law: No Abuse Of Discretion In Trial Court’s $50,000 Award To Husband In Interim Needs-Based Attorney Fees Where Wife Has A Permanent Restraining Order Against Husband And Claims Of Domestic Violence

Nothing In Family Code Section 2030 Absolutely Prohibits A Trial Court From Awarding Interim Attorney Fees Where There Is Documented Evidence Of A History Of Domestic Abuse.

            In Marriage of Sangha, Case No. D077062 (4^th Dist., Div. 1 February 22, 2021) (unpublished), wife was not happy when the trial court awarded her husband – against whom she had a permanent restraining order and claims of domestic violence - $50,000 out of a requested $70,000 in § 2030 interim attorney fees. 

            On appeal, wife did not challenge the trial court’s determination of need or ability to pay, but argued that the trial court erred in excluding her evidence of domestic violence, and that evidence of past domestic violence prohibited the trial court from awarding fees to husband.  The 4/1 DCA disagreed – affirming the award.

            Nothing in § 2030 prohibits a trial court from exercising its broad discretion and awarding interim attorney fees where there is documented evidence of a history of domestic abuse.  Substantial evidence concerning husband’s need and wife’s ability to pay supported the trial court’s determination that $50,000 in fees was warranted.  Indeed, the trial court had admitted some domestic violence evidence – taking judicial notice of wife’s restraining order against husband.  However, although considering evidence of domestic violence, the trial court gave it little weight in awarding the interim fees “to ensure each party has access to legal representation.”  This was no abuse of discretion.  And while the trial court found the domestic violence and restraining order had little impact on the needs-based fees request, it cautioned the parties that the evidence of domestic violence could play a greater role in later proceedings – such as a determination of spousal support.

Arbitration: $237,607.25 Arbitrator Fee Award Affirmed Despite Some Ambiguity On How Fee Proceedings Were Handled

We Don’t Necessarily Agree With The Result In This One—But It Does Reflect Deference To Arbitrator Decisions.

            Bacall v. Shumway, Case No. B302787 (2d Dist., Div. 8 Feb. 18, 2021) (unpublished) is an interesting affirmance of an arbitrator’s award of attorney’s fees in the amount of $237,607.25.  Although we do not opine often on the merits of the decision, this one is where the result seems to be unfair based on some statements by the arbitrator on how fees would be handled.

            Here, the arbitrator tried to do “equal justice” in a case where there was an inactive attorney claiming legal expenses and other costs for performing services for a successful actor/screenwriter Michael Bacall.  The underlying merits are not what we are discussing.  However, what happened was that the merits prevailing party requested fees/costs in a post-hearing arbitration brief.  The other side sent an email to the arbitrator indicating that these requests usually trailed the merits determination, but also indicated an immediate response would be filed if the arbitrator wanted to proceed more quickly.  The arbitrator said this in a responsive email: “Consideration of attorney fees will not take place until the case is decided and a prevailing party is determined.  Anything submitted in that regard will not be read until then.”  Based on this, no response was filed to the fees/costs request, but the arbitrator still issued a final award with a finding that respondents prevailed and were awarded $237,607.25 in fees/costs.  The aggrieved side tried to submit an opposition to the fees/costs request, but this was rebuffed by the arbitrator based on issuance of a final award.

            The 2/8 DCA affirmed, giving deference to the final award by the arbitrator, although candidly conceding that “the arbitrator’s response was vague.”  We agree.  The appellate panel said the other side had to seek clarification, which he did not do.  However, c’mon here … why shouldn’t the other side rely on the arbitrator’s earlier response that there would be subsequent activities on the fees/costs issue.  This one smacks of unfairness to us.

Appealability: Defense Side’s Failure To Appeal Fee Award/Amended Judgment, Much Less Include Fee Motion Paperwork In Appellate Record, Doomed Any Challenge On Appeal.

$125,000 Fee Award Challenge Could Not Be Entertained.

            In RSF Associates, LLC v. Nieto, Case No. D076227 (4^th Dist., Div. 1 Feb. 18, 2021) (unpublished), plaintiff contractor won a $37,222.61 damages award against a landscaper defendant, with the defense cross-complaint recovering nothing.  Later, plaintiff obtained a fees/costs award against defendant of more than $125,000, with an amended judgment issued later to include the compensatory award plus the fees/costs award. 

            The defense was not happy with the result, including the fee award.  However, the appellate court could not even consider the fees/costs challenges.  The defense only appealed the original judgment, not the subsequent fee award or the amended judgment including the fees/costs award.  Beyond that, the defense’s designation of record included no pleadings relating to the fees motion.  Because no appeal was made of the separate fees/costs award, jurisdiction to entertain challenges on that award was not present.  However, the failure to even provide a record of the fees proceedings also doomed any challenges on the merits, even if the jurisdictional obstacle could have been surmounted. 

Indemnity: Related Indemnity Action Fees May Justify Fee Recovery

Indemnity Defensive Actions Can Justify A Fee Award.

            In ReadyLink, Inc. v. Integrated Healthcare Holdings, Inc., Case No. G057280 et al. (4^th Dist., Div. 3 Feb. 11, 2021) (unpublished), our local Santa Ana Court—in a 3-0 opinion authored by Acting Presiding Justice Moore—reminded us that substantial attorney’s fees ($1.2 million in the particular matter) can be awarded for a party needing to defend an indemnity action raised as an offset.  Just to show how related actions can give rise to fee recovery.  (Children’s Hospital v. Bonta, 97 Cal.App.4^th 740, 779-780 (2002).).

Deadlines, Employment, Reasonableness Of Fees: $84,107.50 Fee Award, With Stipulated-To Small Reduction, Affirmed On Appeal In Wage/Hour Win After Two-Day Bench Trial

Small Claims Work Excluded, So The Ultimate Modified Award Was $83,555; Compensatory Award Was $30,929.94 Plus Interest.

            In Ojeda v. Azulay, Case No. B302440 (2d Dist., Div. 3 Feb. 10, 2021) (unpublished), plaintiff employee prevailed against defendant employers on three of eight Labor Code claims after a two-day bench trial, and was awarded $30,929.94 in damages plus interest.  That, of course, gave rise to wage/hour fee entitlement, with plaintiff moving for $126,161.25 (lodestar of $84,107.50 plus a 1.5 multiplier) in fees and $4,910.99 in costs.  Plaintiff had to admit that he was a couple of days late in filing the fee motion, but he explained why.  Despite an opposition, the lower court awarded the $84,107.50 lodestar request without a multiplier, prompting an appeal by the other side.

            The untimeliness argument did not resonate because plaintiff fell on his sword and the lower court impliedly found good cause to consider the merits of the fee motion, all the more so because there was no reporter’s transcript of the fee hearing to show otherwise.  On the merits as to the amount of the fee award, no abuse of discretion was shown, with plaintiff admitting that a minor $552.50 for related small claims work should not have been included—something the lower court failed to deduct, but the appellate court did, affirming the remainder of the award.  Requesting compensation for a 2-day bench trial, 197.9 hours at $425/hour, was not seen as being patently outrageous as far as a lodestar fee request. 

Cases Under Review, Costs: SCOTUS Grants Certiorari On The Question Of Whether District Courts Have Discretion To Deny Or Reduce Appeal Costs

Particular Question Dealt With Substantial Supersedeas Bond Premiums and Interest.

            On January 8, 2021, the U.S. Supreme Court granted certiorari on an appellate costs issue, in City of San Antonio v. Hotels.com, No. 20-334 (U.S.), to wit:  “Whether, as the U.S. Court of Appeals for the 5th Circuit alone has held, district courts “lack[] discretion to deny or reduce” appellate costs deemed ‘taxable’ in district court under Federal Rule of Appellate Procedure 39(e).”

            In this particular case, Hotels.com eventually obtained reversal of a judgment and then sought to recoup $2,008,359 in supersedeas appellate bond premiums and interest as F.R.App.P. 39(e) appellate costs.  The Fifth Circuit found it had no discretion to reduce or deny the appellate costs request, a decision at odds with the views of the First, Second, Fourth, Sixth, Eighth, Ninth, Eleventh, and Federal Circuits.  The framing of the issue alone might suggest that this one may well get reversed—but we shall see!

Family Law: $75,000 Breach-Of-Fiduciary Duty Sanction Under Family Code Section 1101(g) Reversed Based On Lack Of Competent Evidence

Make Sure Your Supporting Evidence Gets Properly Admitted, With Judicial Notice Not Likely To Get The Job Done!

            The Fifth District in Marriage of Patterson, Case No. F076753 (5^th Dist. Feb. 9, 2021) (unpublished) reversed a Family Code section 1101(g) $75,000 sanctions award—mainly for attorney’s fees—in favor of ex-husband and against ex-wife.  The reason was simple:  lack of competent evidentiary support.  The declaration indicating ex-husband paid $75,000, the predicate of the award, was not admitted into evidence (even though filed in court, an act which does not automatically mean it was actually received into evidence) and not properly judicially noticed in the matter.  So, a remand was ordered, with nothing preventing the reintroduction of the income and expense declaration so as to provide an evidentiary foundation for any future sanctions award.

Appealability: Failure To Timely Appeal Original Judgment Determining Prevailing Party Or Subsequent Fee Order Fixing Costs Doomed Any Merits Challenge Of Fee Award

As We Have Said Before, Appeal Judgment As Well As Subsequent Fee Order To Be Safe.

            This next case from our local Santa Ana court stresses a recommendation we have throughout the years encouraged practitioners to heed:  appeal both a final judgment (the original one, not amended) and a subsequent postjudgment fee order separately.  (Torres v. City of San Diego, 154 Cal.App.4^th 214, 222 (2007).)

            What happened in Tiger Loans, Inc. v. Hao, Case No. G058954 (4^th Dist., Div. 3 Feb. 9, 2021) (unpublished) was that plaintiff ex-employer lost most of its misappropriation claims except for a $32.80 award on a duty of loyalty claim, while defendant ex-employee won $8,691.30 on wage/hour counter-claims.  Subsequently, ex-employee won $124,302 in fees and $17,222.74 in costs based on certain Labor Code fee-shifting provisions—which shows how the fees award can certainly be disproportionate to the compensatory recovery in this area.  The original judgment determined ex-employee was the prevailing party, a subsequent fees/costs order was entered in favor of ex-employee, and later an amended judgment was entered containing the amount of the fees/costs ruling.  Ex-employer appealed the fees/costs award.

            The Fourth District, Division 3, in a 3-0 decision authored by Justice Thompson, dismissed the appeal.  The problem was that the ex-employer appellant failed to timely appeal the fees/costs ruling.  Although notice of entry of the original judgment or the subsequent fees/costs order was not done such that the outside 180-day appeal period applied, appellant appealed 266 days after the original judgment and 184 days after the fees/costs order.  The amended judgment merely added costs and fees to the original judgment, such that it did not extend the time to appeal from the original judgment.  So, no jurisdiction to consider the fees/costs ruling against ex-employer.  Moral of the story—appeal the original judgment, the subsequent fees/costs order, and the amended judgment.  Even if some are determined to be duplicative or subsumed, you at least get your chance on the merits of an appeal!

Judgment Enforcement: Trial Court’s Denial Of Judgment Assignee’s Motion for Code Civ. Proc. § 685.040 Attorney’s Fees, Where Underlying Judgment Entitled Judgment Creditors To Fees, Reversed And Remanded

Although Original Judgment Creditors Did Not Move For Fees In The Underlying Judgment, The Underlying Judgment Obligating Judgment Debtor To Pay Reasonable Attorney Fees Was Sufficient To Trigger § 685.040.

            Code Civ. Proc. § 685.040 entitles a judgment creditor to the reasonable and necessary costs of enforcing a judgment – including attorney fees which can be included as costs – if the underlying judgment includes an award of fees to the judgment creditor pursuant to Code Civ. Proc. § 1033.5.

            An assignee of a judgment may seek attorney fees for enforcement of the judgment under § 685.040 if the original judgment creditor would be entitled to recovery under that statute. (Miller v. Givens, 30 Cal.App.4th 18, 22 (1994).)

            In Guo v. Moorpark Recovery Service, LLC, Case No. A159195 (1^st Dist., Div. 5 February 8, 2021) (published), an assignee of the original judgment creditors engaged in collection efforts against judgment debtors and moved for attorney fees under § 685.040. Although the original judgment creditors had been deemed the prevailing parties under Code Civ. Proc. § 1032 and entitled to recover their costs of suit and reasonable attorney fees, the trial court denied assignee’s motion – relying on Imperial Bank v. Pim Electric, Inc., 33 Cal.App.4^th 540 (1995), and concluding it could not award attorney’s fees or paralegal fees because the original judgment creditors never filed a motion for fees and, therefore, fees were not “awarded” in the underlying judgment.

            Assignee appealed, and the 1/5 DCA reversed and remanded.  Case law interpreting section 685.040 looks to the judgment rather than the contract itself when determining a party’s entitlement to fees.  (Jaffe v. Pacelli, 165 Cal.App.4th 927, 935 (2008); Tomaselli v. Transamerica Ins. Co., 25 Cal.App.4th 1766, 1770 (1994).)  Though the underlying judgment did not specify an amount to be awarded, it clearly provided for an award of fees to the original judgment creditors.  As such, the judgment included an obligation by judgment debtor to pay reasonable attorney fees, and no more was required for § 685.040 to apply.  Additionally, the panel disagreed with Imperial’s conclusion that a judgment awarding reasonable attorney fees is not an award of attorney fees for purposes of § 685.040 – also finding that Imperial did not address whether a judgment that includes an award of “reasonable attorney fees” but not an award of a specified amount is an “award” of fees under § 685.040.  As a result, the 1/5 DCA found Imperial was not authority for this case. 

Allocation, Private Attorney General: Doe v. Westmont College Is Now A Published Decision

Prevailing Section 1021.5 Parties Successfully Defending The Case On Appeal Are Allowed To Move For Attorney Fees Post-Appeal Even If The Trial Court Denied Their Pre-Appeal Fees Motion.

            We discussed Doe v. Westmont College, Case No. B303208 (2d Dist, Div. 6) in our January 26, 2021 post.  The case was unpublished at the time, but was certified for publication on February 8, 2021.

            In Doe v. Westmont College, plaintiff appealed after the trial court denied his motion for $85,652, under Code Civ. Proc. § 1021.5, for fees incurred on a prior appeal successfully defending the trial court’s judgment issued in his favor – which resulted in a published decision wherein the 2/6 DCA reversed and remanded for a redo.  The trial court had abused its discretion by failing to examine whether private enforcement was necessary and whether the financial burden of private enforcement warranted a fees award.  The panel also found that plaintiff’s failure to apportion fees between those that advanced his private interests and those that advanced the public interest was not an appropriate basis for denial – with the trial court having broad discretion to apportion fees if seeking party has failed to do so. 

          As to defendant’s contention that plaintiff was not entitled to § 1021.5 fees post-appeal because he had not appealed the trial court’s denial of his pre-appeal request for § 1021.5 fees, the panel disagreed.  It found plaintiff’s pre-appeal and post-appeal motions for fees were separate, independent motions.  Plaintiff’s post-appeal motion for fees was not a repeat of the original fees motion that was denied and not appealed, and the resulting published opinion from plaintiff’s defense of the trial court’s judgment in the first appeal conveyed a significant benefit on a large group of people.  In certifying the opinion for publication, the 2/6 DCA modified the opinion to add the following statement: “In some cases, although parties succeed at trial, the full breadth of their success is not realized until they defend the case on appeal. May such a party move for attorney fees post appeal if the trial court denied their preappeal attorney fee motion? We conclude that they may do so.”

Private Attorney General: $69,718 In § 1021.5 Attorney Fees Awarded To Attorney General Xavier Becerra After Defeating Petition To Have His Name Removed From The November 2018 Election Affirmed On Appeal

Becerra’s Successful Defense Resulted In A Published Decision Enforcing An Important Public Right And Conferring A Significant Benefit On The General Public, And Becerra’s Personal Financial Burden Incurred In Defeating The Petition Outweighed Any Pecuniary Benefit Becerra Might Have Received If He Won The Election.

            Plaintiff Eric P. Early (and his election committee) filed a petition for writ of mandate seeking to remove Xavier Becerra as a candidate for Attorney General on the November 2018 ballot on the basis that Becerra was ineligible because he had not practiced during the five years preceding the election, and was not “admitted to practice” as required under Gov. Code § 12503.  Becerra (and his election committee) defeated Early’s petition – a result that the Third District affirmed on appeal in a published opinion that stated for the first time that Gov. Code § 12503 does not require active or actual practice of law, thereby expanding the pool of eligible candidates for Attorney General, for example, to include members of the state bar who had voluntarily taken inactive status while serving in other public office. (Early v. Becerra, 47 Cal.App.5th 325, 329 (2020).)

            After defeating Early’s petition, Becerra successfully moved for Code Civ. Proc. § 1021.5 attorney fees – obtaining a fee award of $69,718 from the trial court in Early v. Becerra, Case No. C089943 (3d Dist., February 8, 2021) (published).  Early appealed and the Third District affirmed.

            Becerra’s successful defense of Early’s petition enforced an important public right and conferred a significant benefit on the general public – resulting in a published decision that put to rest a challenge to the eligibility of a candidate for Attorney General under § 12503, which had twice been mounted against Attorney General candidates, with a claimed disqualification being only that the candidates were “admitted to practice” but “inactive” while serving in other public office. 

            Additionally, there was no abuse of discretion in the trial court’s determination that the financial burden Becerra personally incurred in defending Early’s petition outweighed any pecuniary benefit Becerra might have received in the form of the salary paid to the Attorney General or otherwise.  After all, Becerra’s successful defense did not guarantee that he would be elected and gain the pecuniary benefits associated with being Attorney General – only that his name remained on the ballot.  (Boatworks, LLC v. City of Alameda, 35 Cal.App.5th 290, 310 (2019) [discussed in our June 13, 2019 post].

            Finally, the panel found no abuse of discretion in the amount of fees awarded, and disagreed with Early’s contention that the trial court should have stricken the entirety of Becerra’s fees-on-fees request (fees incurred in bringing a fee motion), rather than only half, based on the trial court’s finding that time spent on Becerra’s fees motion was excessive and unreasonable in part.  Citing Serrano v. Priest, 20 Cal.3d 25, 49 (1977) [our Leading Case No. 3], the panel held that “[t]he ‘experienced trial judge is the best judge of the value of professional services rendered in his [or her] court, and while his [or her] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.’ ”

In The News: U.S. Large Law Firms, As A Whole, Saw Net Income Go Up In 2020 During The Pandemic After Discretionary Cuts, With Many Partners Taking Cuts Averaging 15% Of Their Draws

For 2021, Net Income For Firms Still Predicted To Go Up.

            Although the COVID-19 pandemic certainly has affected the U.S. law industry, some recent reports suggest that its impact was not as bad as feared, according to some articles on the February 3, 2021 on-line edition of the ABA Journal.

            U.S. law firms cut overhead such that larger law firms had a net income average growth spurt of 9.9% (an 11.2% growth in profits per equity partner).  However, a Law360 release, looking at data between September 1-October 16, 2020 for firms with at least 25 attorneys, found that 43% of the partners took pay cuts, with the pay cut being a median 15% in amount.

            In 2021, U.S. law firms are expecting an average 3.5% growth in revenues. 

Civil Rights: Plaintiff Winning $25,000 FEHA Judgment After Five-Day Jury Trial Properly Awarded Reduced Fee Recovery Of $141,165

Plaintiff Requested $492,000 In Fees (Inclusive Of A 1.5 Multiplier).

            You might think the plaintiff appealed in this one, but he did not.  The defense appealed the fee recovery, even though the trial judge had awarded a much lower fee recovery from the opening request.

            In Velez v. Kohl Building Maintenance, Inc., Case No. B300253 (2d Dist., Div. 1 Feb. 2, 2021) (unpublished), plaintiff won a very contested 5-day FEHA jury trial to the tune of $25,000 on discrimination/failure to accommodate claims (but losing on a retaliation claim and losing an attempt to garner punitive damages).  Plaintiff then moved to recover a $492,000 FEHA fee award ($328,000 lodestar and a 1.5 multiplier).  The defense contested that no fees were warranted based on Chavez v. City of Los Angeles, 47 Cal.4^th 970 (2010) [our Leading Case No. 13], because the case could have been tried as a limited case.  The trial judge rejected that notion, but did reduce for block billing, duplication (especially a new group of lawyers getting up to speed), excessive hourly rates for the experience of the attorneys involved, lack of success on the one claim, and unnecessary multiple attendance of attorneys at court appearances/trial. 

            The defense appealed in this one, but appellant gained no reversal of fortune on appeal.  The problem with reliance on Chavez for an outright denial is that this decision is discretionary, with there being some claims which certainly would lead a prudent plaintiff’s attorney to not bring the case as a limited matter.  The reductions in amount were substantial, with the law in the FEHA area being that the fee award does not need to be proportional to the damages obtained—especially after a 5-day jury trial.  

Probate, Reasonableness Of Fees: Probate Court’s $26,900 Reduction To Fees Request Of $73,400 By Attorney Appointed To Represent Proposed Conservatee Affirmed On Appeal

Attorney Appealed Reduction With Only Speculation As To How The Probate Court Reached Amount Awarded – Providing No Reporter’s Transcript Or Settled Statement On Appeal.

            In Conservatorship and Estate of Bessard, Case No. A156773 (1^st Dist., Div. 2 January 29, 2021) (unpublished), an attorney who had been appointed by the probate court to represent a 92-year-old proposed conservatee sought fees for her services after the probate court granted her petition to have a private professional fiduciary conservator appointed as conservator of the person and estate for the proposed conservatee.

            Specifically, the attorney sought $73,400 in fees and $2,099.41 in costs, and conservatee’s daughter opposed – challenging the reasonableness of approximately $30,000 of the attorney fees and costs requested by attorney, and proposing an additional reduction of approximately $13,700 based on an hourly rate of $325 rather than $400.  Additionally, daughter noted the small size of conservatee’s estate and that conservatee’s monthly income was approximately $1,200.  After rounds of briefing and a hearing, the probate court took the matter under submission – ultimately awarding attorney $46,500 in fees and $2,055.41 in costs.

            Attorney appealed – arguing that the trial court abused its discretion when it reduced her attorney fees request by $26,900.  However, as she provided no reporter’s transcript or settled statement on appeal, she could only speculate as to how the probate court reached the fee award.  As such, the 1/2 DCA had no basis to find error and affirmed – noting the burden is on the appellant to establish error.

SLAPP: Trial Court Properly Denied SLAPP Motion, But Did Not Abuse Discretion In Denying Attorney Fees Requested By Prevailing Cross-Complainants

SLAPP Motion Sought To Strike Allegations That Were Not Connected To An Identified Claim For Relief, But Was Not Frivolous.

            In Noguera v. Hull, Case No. A157714 (1^st Dist., Div. 1 January 29, 2021) (unpublished), plaintiff sued neighbor defendants for their alleged failure to pay their share of improvement costs for certain improvements to a gate and private road that provided access to their properties.  Defendants cross-complained against plaintiff regarding an approved application plaintiff made to the Mendocino County Planning Commission for a boundary line adjustment for certain parcels of his property.  Plaintiff filed a general motion to strike portions of the cross-complaint, pursuant to Code Civ. Proc. § 435, along with a SLAPP motion (§ 425.16) – claiming statements in his application to County constituted protected activity.  The trial court granted the general motion to strike, but denied the SLAPP motion.  Additionally, the trial court denied defendants’ request for fees – concluding the SLAPP motion was not frivolous. 

            The parties appealed, and the 1/1 DCA affirmed.  The trial court properly denied plaintiff’s SLAPP motion.  The allegations plaintiff sought to strike were not connected to any identified claim for relief – mere allegations unconnected to an identified claim for relief encompassed in a cause of action – and not subject to the anti-SLAPP statute.  As to defendants’ appeal of denial of their fees motion, the panel found no abuse of discretion.  Although affirming the trial court’s order denying plaintiff’s SLAPP motion, the appellate panel could not conclude that plaintiff’s motion, while erroneous, was completely devoid of any merit.  Additionally, defendants failed to demonstrate that plaintiff brought the SLAPP motion for the purpose of unnecessary delay.  Likewise, the 1/1 DCA denied defendants’ motion for appellate sanctions against plaintiff for bringing a frivolous appeal – finding plaintiff’s appeal did not “cross the line from meritless to frivolous.”

Allocation, Consumer Statutes, Multipliers, Preemption: Prevailing Lemon Law Plaintiff Winning Only $21,957.25 In Damages At Jury Trial Properly Awarded $169,602 In Attorney Fees, Inclusive Of .2 Multiplier, Against Dealership And Finance Company

Apportionment Was Not Necessary Due To Intertwined Claims, Multiplier Was Appropriate Given Plaintiff’s Counsel’s Contingency Risk, And – Contrary To Lafferty And Spikener – 2/5 DCA Determined That The Holder Rule Does Not Limit The Attorney Fees A Plaintiff May Recover From A Creditor-Assignee.

            For a great discussion on the Holder Rule cap and its applicability to attorney fees, we commend Pulliam v. HNL Automotive Inc. et al., Case No. B293435 (2d Dist., Div. 5 January 29, 2021) (published) to our readers.

            In Pulliam, a Song-Beverly Act (California’s lemon law) plaintiff was awarded $169,602 in attorney fees, consisting of a $141,335 lodestar plus a .2 multiplier, after prevailing at jury trial and being awarded $21,957.25 in damages against dealership and the finance company that accepted assignment of the retail installment sales contract for her purchase of a “Certified Pre-Owned” 2015 Nissan Altima. 

            Defendants appealed – arguing: (1) plaintiff’s counsel failed to provide evidence of their hourly rates, (2) the trial court erred in refusing to apportion attorney’s fees between plaintiff’s successful and unsuccessful causes of action, (3) the trial court erred in applying a lodestar multiplier because the lawsuit was not exceptionally difficult and plaintiff’s counsel was not exceptionally skilled, and (4) finance company was not liable for attorney’s fees under title 16, section 433.2 of the Code of Federal Regulations (2020) (the Holder Rule) because its liability could not exceed the amount plaintiff paid to it. 

            The 2/5 DCA, in a 3-0 opinion authored by Justice Rubin, affirmed – finding no abuse of discretion, and concluding the Holder Rule does not limit the attorney fees a plaintiff may recover from a creditor-assignee.  First, plaintiff’s counsel attached a declaration – which included a copy of the firm’s invoice identifying the timekeepers, the work performed, and the timekeepers’ hourly rates – to plaintiff’s fee motion.  Additionally, plaintiff’s counsel’s declaration described the firm’s rates and the qualifications of each timekeeper, along with a national survey of prevailing rates among consumer protection attorneys – including California attorneys.  Second, the record supported the trial court’s view that apportionment of the fees was not possible because the successful and unsuccessful claims involved a common core of facts and intertwined theories.  Third, the panel found the multiplier was modest and accounted for the risk plaintiff’s counsel took in litigating the case against defendants whom the court found made the case challenging and protracted.

            Finally, as to the Holder Rule – promulgated by the Federal Trade Commission in 1975 as a consumer protection measure to abrogate the holder in due course rule for consumer installment sales contracts funded by a commercial lender – the panel found its cap does not apply to attorney fees.  The final sentence of the Holder Rule states that recovery by the debtor shall not exceed the amounts paid by the debtor under the installment sales contract. Finance company asserted that this cap limited plaintiff’s recovery of both damages and attorney fees from it to the amount she paid under the installment contract – relying on Lafferty v. Wells Fargo Bank, N.A., 25 Cal.App.5th 398 (2018) [discussed in our July 20, 2018 post] and Spikener v. Ally Financial, Inc., 50 Cal.App.5th 151 (2020) [discussed in our June 11, 2020 post].  However, as the panel pointed out, many opinions on this issue have been contradictory, and it concluded that to include attorney’s fees in the Holder Rule’s limitation on recovery would be out of sync with its objective of reallocating the costs of the seller’s misconduct from the consumer back to the seller and creditor.  Additionally, the California Legislature had taken a similar view in enacting Civil Code § 1459.5 – intending to repeal Lafferty and allow recovery of fees in excess of the Holder Rule’s cap.  As to financial company’s argument that, as held in Spikener, the FTC’s Rule Confirmation (holding fees are included in the cap) is entitled to deference and preempts § 1459.5, the panel disagreed – finding the FTC’s Confirmation did not meet the four-marker test set forth in Kisor v. Wilkie, 139 S. Ct. 2400 (2019) for determining when regulatory deference is appropriate.  “[I]n considering deference, ‘a court must make an independent inquiry into whether the character and context of the agency interpretation entitles it to controlling weight. [Citations.]’” (Id. at p. 2416.)

Section 1717: Nonsignatory Defendant Sued On Note Properly Awarded $92,622.50 In Attorney Fees For Prevailing Against Plaintiff's Claims

Prevailing Nonsignatory Defendants, Who Are Sued On A Contract As If A Party To It, Are Entitled To Fees Where Plaintiff Would Be Entitled If Prevailing In Enforcing Contractual Obligation Against Defendant.

            In Town & Country etc. v. King City etc., Case Nos. B296864/B303927 (2d Dist., Div. 5 January 29, 2021) (unpublished), two corporate tenants jointly entered into a lease with commercial landlord to build out and operate a restaurant.  The principals of the two corporations also individually executed a guaranty.  After the restaurant failed to timely open and rents were unpaid, landlord entered into a secured note in the amount of $83,960 (the amount of unpaid rent to that point) plus interest executed by only one of the corporate tenants and its principal.  When that note also went unpaid, landlord sued on the note against both corporate tenants, along with the principal of each.

            After tenant/principal who had entered into the note defaulted, landlord continued its litigation against the second tenant/principal – claiming the note resulted from a loan of money to both tenants for use in the operation of their restaurant.  Landlord later, merely weeks before trial, unsuccessfully sought leave to amend its complaint to add a breach of lease claim and to redefine the secured note as a forbearance agreement on unpaid rent.  Following a bench trial, the trial court found in favor of second tenant/principal concluding they were not parties to the note.  Afterward, the trial court awarded second tenant/principal $92,622.50 in section 1717 attorney fees pursuant to the fees provision in the note. 

            Landlord filed two appeals – consolidated by the 2/5 DCA.  One challenged the denial of plaintiff’s motion for leave to amend and the trial court’s finding that second tenant/principal was not liable under the note, and the other challenged the postjudgment attorney fees order.  Plaintiff’s arguments on appeal went nowhere – with the panel affirming in a 3-0 opinion.

            First, landlord’s unwarranted delay in bringing its motion to amend alone was sufficient support for the trial court’s exercise of discretion to deny leave to amend contention.  Next, landlord’s contention that second tenant/principal was bound to the note because first tenant/principal signed it for the benefit of the partnership ignored the fact that approximately 18 months prior to execution of the note, second tenant/principal had given notice that the partnership with first tenant/principal had failed and second tenant/principal was “pulling out” of the venture and no longer involved.  Finally, as to the fees, landlord argued for the first time on appeal that the attorney fee clause in the note did not apply to second tenant/principal.  At trial, landlord had conceded that second tenant/principal was the prevailing party on the note and entitled to fees – contesting only the amount of those fees.  Although considering landlord’s argument regarding the attorney fee clause forfeited on appeal, the panel explained that a nonsignatory defendant, sued on a contract as if a party to it, may recover attorney fees when the plaintiff would clearly be entitled to fees if it prevailed in enforcing the contractual obligation against the defendant. (Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 128 (1979) [our Leading Case No. 5]; Burkhalter Kessler Clement & George LLP v. Hamilton, 19 Cal.App.5th 38, 40-41, 46 (2018) [discussed in our January 9, 2018 post].) 

Deeds Of Trust, Requests For Admission, Section 1717: Civil Code § 1717 And Code Civ. Proc. § 2033.420 Award Of $191,619.47 In Attorney Fees And $29,345.97 In Costs To Defendants Prevailing Against Negligence And Fraud Claims At Trial Affirmed

Civil Code § 1717 Fees Are Awardable In An Action To Enforce Or, As In This Case, Avoid Enforcement Of A Contract, And Plaintiff Failed To Prove He Met Any Of The Four Exceptions To The Code Civ. Proc. § 2033.420 Mandated Fee Award For His Failures To Make Admissions.

            In Yoon v. Cam IX Trust et al., Case No. B301191 (2d Dist., Div. 8 January 29, 2021) (published), plaintiff sued alleging claims for negligence and fraud, statutory claims, and causes of action to set aside the trustee’s sale and quiet title in connection with a trustee’s sale of his home.  By the time the case went to a jury, only the negligence and fraud claims remained – which defendants successfully defeated.  Afterward, defendants – the assignee of the deed of trust securing repayment of a $640,000 promissory note, and assignee’s loan servicer – moved for Civil Code § 1717 fees pursuant to fee provisions in the promissory note and deed of trust, and under Code Civ. Proc. § 2033.420 for expenses incurred in proving the truth of matters plaintiff denied in responses to requests for admission.  The trial court, after making some reductions, found reasonable and awarded $191,619.47 in attorney fees and $29,345.97 in costs.  Plaintiff appealed.

            The 2/8 DCA affirmed.  Contrary to plaintiff’s argument that § 1717 did not apply because his negligence and fraud claims were not based on the contract, the gravamen of plaintiff’s lawsuit sought to avoid his obligations under the note by making claims defendant acted negligently and fraudulently during the foreclosure process – even arguing at trial that defendants’ failed to comply with the terms in the promissory note and deed of trust by improperly sending a foreclosure option notice to the wrong address.  “[F]ees should be awarded to the extent that the action in fact is an action to enforce – or avoid enforcement of – the specific contract.” (Shadoan v. World Savings & Loan Assn., 219 Cal.App.3d 97, 108 (1990).)

            As to the requests for admission, plaintiff argued that the trial court abused its discretion in making the § 2033.420 award because plaintiff had reasonable ground to believe that he would prevail on the matters – thus entitling him to an exception, under Code Civ. Proc. § 2033.420(b)(3), to the mandated fee award.  However, plaintiff failed to support his claim that he had reasonable ground with either evidence or circumstance both at trial and on appeal.  Finally, while the panel agreed with plaintiff’s argument that fees can be awarded only for the period after he denied the requests for admission, it found no adjustment in the fee award was necessary as fees were also properly awarded under § 1717.

Consumer Statutes: $11,425 Song-Beverly Act Fee Recovery, Out Of Requested $49,835 (Plus Multiplier), Reversed Where Plaintiff’s Rejection Of Prior Offer Resulted In Added Value And Where Court Improperly Focused On Contingency Retention Amount

Re-Do Required Based On These Two Errors.

            California’s lemon law statute can result in substantial fee awards under the Song-Beverly Act statutory fee-shifting provision.  However, the lodestar standard must be applied, which means an inquiry into the reasonable work even though prior CCP § 998 offers were rejected and irrespective of any inquiry into the contingency award to be paid to plaintiff’s counsel.

            In Chapman v. Hyundai Motor America, Case No. A158279 (1^st Dist., Div. 5 Jan. 28, 2021) (unpublished), plaintiff’s Hyundai Sonata had electrical problems which were not solved, leading to a Song-Beverly Act suit which sought damages, rescission, civil penalties, and attorney’s fees.  Plaintiff rejected three CCP § 998 offers: (1) $12,415.77; (2) $34,000 plus recovery of attorney’s fees to date; and (3) $50,000 plus recovery of fees.  However, plaintiff finally accepted a fourth 998 offer for $120,372 plus the ability to seek fees and costs by motion if no agreement could be reached on the amounts.  No agreement was reached, with plaintiff moving to recover $45,835 in lodestar fees, plus a 0.5 enhancement (total of $74,752.50), along with costs and expenses of $8,396.38.  Eventually, the lower court awarded $11,425 in fees, reducing the request based on the perceptions that the $34,000 second 998 offer should have been accepted (so that no work after that was reasonable) and that it could not gauge the reasonableness of the fee request without an inquiry into the contingency fee arrangement between plaintiff and its counsel.

            Plaintiff appealed, getting a reversal and remand win. 

            The main problems with the lower court’s reasoning was that plaintiff was seeking civil penalties such that the rejection of the $34,000 was reasonable, not to mention that the defense gave plaintiff 3.5 times the rejected second offer to resolve the case through the fourth 998 offer—tough to argue that the efforts after the second offer did not bear fruit.  On the contingency arrangement issue, the appellate panel agreed that the lodestar standard was the proper guidepost, agreeing with Reynolds v. Ford Motor Co., 47 Cal.App.5^th 1105, 1113-1114 (2020) [discussed in our April 23, 2020 post] that contingency arrangement was irrelevant to the fee inquiry.   “To the extent counsel ends up with a potential double recovery (or unconscionable fees) from the combination of the statutory fee award and amounts to be paid from the settlement proceeds under a contingency fee agreement, it is a matter between the attorney and client.”  (Slip Opn., p. 17.)

Probate: Where Attorney Only Delayed Distribution But Did Not Conceal Or Remove Funds, Attorney’s Fees Recovery Under Probate Code Section 859 Was Improper

Only Three Forms Of Specified Misconduct Give Rise To Fee Entitlement, With None Present Here.

             Probate Code section 859 provides that “If a court finds that a person has in bad faith wrongfully taken, concealed, or disposed of [estate] property[,] . . . the person may, in the court’s discretion, be liable for reasonable attorney’s fees and costs.”

            In Khatirine v. Marquez, Case No. A159348 (1^st Dist., Div. 4 Jan. 26, 2021) (unpublished), an attorney appealed an order compelling him to pay about $104,000 (twice the value of about $52,000 in funds) and $7,504.46 in a section 859 penalty to an estate’s personal representative.  The 1/4 DCA reversed, finding that the representative was only entitled to routine costs as the prevailing party but no section 859 penalty or attorney’s fees.  The reason was that attorney did not conceal or remove property, but only delayed distributing the $52,000 until ordered to do so by the probate court.  Section 859 is not a general “misconduct” statute, but only allows for fee recovery if three specified forms of misconduct occurred—and none of them did under the circumstances of the case.