CALIFORNIA ATTORNEY'S FEES

Arbitration, Employment: 4/3 DCA Affirms Lower Court’s Denial Of Motion To Compel Arbitration Because, Among Other Things, Arbitration Clause Gave Arbitrator Mandatory Authority To Award Fees To Employer Even Where Fee-Shifting Statutes Favored Employe

Mandatory Language Of Fee Clause Demonstrated Substantive Unconscionability, Which Was Not Supplanted By More General Reference To JAMS Employment Rules Which Were More Discretionary In Nature.

            We commend employment attorneys to read Randall v. Veros Credit, LLC, Case No. G056463 (4^th Dist., Div. 3 Sept. 17, 2019) (unpublished), where a trial judge denied an employer’s motion to compel arbitration against an employee based on a determination that the arbitration clause was procedurally and substantively unconscionable.  Numerous grounds are discussed, but we focus on the one area which is relevant for our blog.

            The problematic clause basically stated that the losing party in an arbitration would (“shall”) pay to the prevailing all costs plus a reasonable sum for attorney’s fees.  The defect was that this mandatory clause also encompassed one-way fee-shifting provisions in the Labor Code which would not allow exposure to a losing employee even though no such exposure could be faced in a civil forum.  Neither the lower nor appellate courts found this substantively tolerable because awarding mandatory fees to a prevailing employer in an action concerning overtime wages does not conform to the employee’s statutory rights.  Employer argued that the arbitrator obviously knew how to apply Labor Code fee shifting, but the appellate court was not impressed given the mandatory nature of the clause.  (Cf. Serpa v. California Surety Investigations, Inc., 215 Cal.App.4^th 695, 709-710 (2013).)  Employer then fell back on the argument that JAMS Employment Arbitration Rule 24(g) permits arbitrators to award fees if “allowed by applicable law,” but this generally worded rule does not supplant the specifically-worded arbitration fees clause to the contrary.  (Rebolledo v. Tilly’s, Inc., 228 Cal.App.4^th 900, 920 (2014).)  Given that there were other infirmities in the arbitration clause, the offending sections could not be severed.

            This case certainly gives drafting tips to employment attorneys wanting to enforce arbitration clauses; at the least, there needs to be language qualifying the arbitration provision to say the losing party need only pay costs and attorney’s fees employees would have been liable for in a civil forum.  (See Slip Op., p. 14.)  Presiding Justice O’Leary authored the 3-0 opinion.

Fee Clause Interpretation, Reasonableness Of Fees: Plaintiff Subhauler Winning Net Judgment Of $19,113.84 Was Properly Awarded Contractual Fees Of $100,415

Contractual Fees Do Not Have To Be Proportional And Unsuccessful Efforts Can Be Awarded.

            In Cheema v. L.S. Trucking, Inc., Case Nos. A150234/A151044 (1^st Dist., Div. 4 Sept. 17, 2019) (published), plaintiff, a subhauler for defendant trucking company, won affirmative recovery in the form of a net judgment of $19,113.84.  There was a broad contractual fees clause, which led the trial judge to award plaintiff the fully requested $100,415 in attorney’s fees.

            Both sides appealed, with plaintiff winning some relief on prejudgment interest and penalty denials.  However, the fee award was sustained.  Contractual fees do not have to be proportional to the damages award (Cruz v. Ayromloo, 155 Cal.App.4^th 1270, 1276 (2007)), and trial judges have broad discretion to not reduce fee requests for unsuccessful, albeit nonfrivolous, motions along the way. 

POOF!, Sanctions: $70,548.95 CCP § 128.5 Order Against Most Plaintiffs Reversed Based On Erroneous Denial Of Relief From Jury Trial Waiver

Also, Another Plaintiff Was Not Give Safe Harbor Notice In Time To Do Anything—So, A Reversal.

            The importance of the jury trial right was front and center in Mackovksa v. Viewcrest Road Properties, Case No. B288778 (2d Dist., Div. 7 Sept. 18, 2019) (published), although the ultimate merits reversal also made a reversal of CCP § 128.5 sanctions against certain plaintiffs an ensuing result on appeal.

            What happened here was that a lower court would not grant relief from a jury trial waiver where the plaintiff side did not post jury fees at the case management conference.  The case was then transferred to a different trial judge, who conducted a bench trial, ruled in favor of the defense, and then imposed $70,540.95 in CCP § 128.5 sanctions against plaintiffs for prosecuting a frivolous action, overruling objections that no safe harbor period compliance took place and that the sanctions motion was untimely filed. 

            Plaintiffs wisely appealed.

            The 2/7 DCA, given that the appeal focused on the inviolate constitutional right to a jury trial, reversed the merits judgment and the sanctions award. 

            Plaintiffs did not challenge the jury waiver by writ, opting for an appeal.  There appears to be a split in authority on whether a party has to show actual prejudice rather than presumed prejudice when that party appeals versus pursing a writ.  The Court of Appeal found that actual prejudice did not have to be shown when the normal appeals route was chosen.  Plaintiffs were entitled to a jury trial they did not obtain.

            With respect to sanctions against most of the plaintiffs, a reversal was required because it was founded on a bench trial which should not have occurred.  As to another plaintiff, no safe harbor period was given such that the sanctions award went POOF! on that basis.

Eminent Domain: Litigation Expense Properly Denied To Condemnee Who Accepted Condemnor Caltrans’s Final Offer Of $5,500 Before Trial In Settlement, Only $500 Less Than Condemnee’s Final Settlement Demand

Small Differential Led Appellate Court Majority To Affirm Trial Court’s Litigation Expense Denial, While Concurring Justice Should Hold That Acceptance Of Caltrans’s Actual Final Offer Was Reasonable As A Matter Of Law.

            In People ex rel. Dept. of Transportation v. Karimi, Case No. E069448 (4^th Dist., Div. 2 Sept. 16, 2019, posted Sept. 17, 2019) (unpublished), condemnor Caltrans sought to acquire by eminent domain a 0.29-acre portion of a vacant property in Phelan partly owned by condemnee Karimi.  Caltrans made a $2,500 deposit and obtained an initial appraisal at $1,000.  Karimi obtained an $11,000 appraisal.  However, in line with final demand and offer procedures under California’s eminent domain statutes, Karimi filed a final demand for $6,000 and Caltrans filed its final offer of $5,500.  At a mandatory settlement conference on the eve of trial, Karimi and co-owners accepted Caltrans’s $5,500 offer (which included statutory interest to the condemnee and his co-owners).  Karimi and co-owners filed a motion for litigation expenses under CCP § 1250.410 based on the theory that Caltrans’s initial appraisal and deposit were too low when compared with the final settlement judgment amount of $5,500.  They sought to recoup $136,592.04 from Caltrans, with the trial court finding Caltrans’s final offer reasonable and denying the litigation expense request.

            The 4/2 DCA affirmed that denial, in a 3-0 decision with a qualifying concurring opinion by Justice Raphael. 

            The majority concluded that consideration of anything else except the final demand and offer was irrelevant as far as determining the reasonableness of Caltrans’s settlement offer.  This threshold reasonableness determination precluded looking to prior conduct.  (CCP § 1250.410(a).)  Because the differential between the final demand and offer was miniscule, condemnees’ acceptance precluded an award of litigation expenses; the eminent domain law “does not require the parties to take reasonable positions at every stage of the litigation” and “[t]he trial court was therefore not required to get into the morass of deciding whether [the parties] acted unreasonably in litigating the case before making their final positions on the amount of just compensation.”  (Slip Op., at p. 8.) 

            Justice Raphael concurred, but he found that condemnees’ acceptance of Caltrans’s final settlement offer means it was reasonable as a matter of law such that the acceptance was the “end game.”  “That there [was] no difference between the offer and the compensation awarded demonstrates that the offer was reasonable. . . . In my view, our case law should inform landowners that if you accept a final offer in an eminent domain case, you cannot obtain section 1250.410 expenses by convincing the court that the judgment to which you stipulated was unreasonable.”  (Slip Op., concurring opinion at pp. 2, 4.) 

            Both the majority and concurring opinions had troubles in following, outright, the reasoning of People ex rel. Dept. of Transportation v. Superior Court (Menigoz), 203 Cal.App.4^th 1505, 1511-1513 (2012), which held that litigation expenses may not be awarded after any settlement, absent trial actually commencing.  The majority believed they did not have to reach that far given the record showing the final settlement offer was reasonable.  The concurring justice, in a footnote, understood why Menigoz said a trial was required but recognized that there might be a reasonableness concern where the agency’s settlement offer is rejected and the parties settle for more. 

Consumer Statutes, Reasonableness Of Fees: Trial Judge Did Not Abuse His Discretion By Awarding $73,864 In Lemon Law Fees Out Of A Requested $191,688.75

Case Settled For $85,000, With Duplicative Efforts Properly Justifying Lower Court Reduction And With 2/7 DCA Panel Disagreeing With Another Court That Particular Reduction Articulation Applied Outside Of Civil Rights Context.

            Morris v. Hyundai Motor America, Case No. B290693 (2d Dist., Div. 7 Sept. 16, 2019) (unpublished) is a situation where the trial judge properly reduced an inflated fee request where there was an indication of unnecessary duplication and stacking of attorney effort.  The record below was also sufficient to show why the reduction was not across-the-board or based on a percentage cut, instead being based on a reasoned analysis of why reductions were in order.

            Here, a lemon law plaintiff and Hyundai settled on the trial date for $85,000, which was a full statutory “buy-back” of the car, incidental/consequential damages, and a civil penalty.  The settlement did reserve the right for the plaintiff to move for reasonable Song-Beverly Act attorney’s fees as the prevailing party.  Plaintiff moved for lodestar fees of $127,792.50, augmented by a 1.5 multiplier for a grand total request of $191,688.75.  Hyundai principally challenged the claimed hourly rates and duplication of effort given that 11 different lawyers at two different firms were involved with very little paralegal time billed for a non-complex case.  The trial court sided with the major part of Hyundai’s objections, lowering hourly rates for some attorneys and excluding duplicative work (cutting entirely the fees for six billing attorneys, just under 30% of the total billed hours).  It awarded $73,864 in fees (but also an additional $13,068,96 in costs, a costs ruling never challenged). 

            Plaintiff appealed, and the 2/7 DCA affirmed.

            Plaintiff’s first argument was that the lower court engaged in an inappropriate proportionality argument by saying fees were unreasonable based on the settlement amount.  However, the record did not support this contention.  Rather, the reduction was based on too many attorneys billing for a fairly mundane case—especially where many of the tasks by higher billing attorneys could have been handled by paralegals.    (See, e.g., Donahue v. Donahue, 182 Cal.App.4^th 259, 271 (2010).) 

            The appellate court also addressed, in a footnote, plaintiff’s contention that a trial judge had to clearly explain a sizeable reduction in a Song-Beverly Act case based upon Warren v. Kia Motors America, Inc., 30 Cal.App.5^th 24, 37 (2018) [with Warren, in turn relying on the logic of a civil rights case reduction, Kerkeles v. City of San Jose, 243 Cal.App.4^th 88, 88 (2015)].  The 2/7 DCA panel expressly disagreed with Warren when it came to the proposition of conferring a heightened review on a Song-Beverly Act fee award versus a federal civil rights award.

            The major issue was to determine if it was reasonable for the trial judge to cut entirely the fees for six billing attorneys.  Based on the record, this lower court’s “haircut” was just fine because it was reducing for a “balanced billing” effort by a lesser number of attorneys as opposed to the inflated billing submission below.

            With respect to hourly rates, the trial judge did cut them down based on the non-complex nature of the case and on the fact that lower-billing attorneys/paralegals could have completed many of the tasks.  This was no abuse of discretion.  (569 East County Boulevard LLC v. Backcountry Against the Dump, Inc., 6 Cal.App.5^th 426, 438-439 (2016).) 

Probate: Former Trustee Properly Surcharged With Attorney’s Fees For Bad Faith Trustee Conduct Relating To Contesting Accounting Objections/Presenting Unsupported Objections To Successor Trustee’s Accountings

However, Lack Of Admissible Evidence Did Require A $78,000 Reduction In The Total Surcharges.

            Justice Fybel in Bronson v. Jones, Case No. G055462 (4^th Dist., Div. 3 Sept. 13, 2019) (unpublished), except in two respects, affirmed a lower court’s surcharging of a former trustee’s attorney’s fees based on her bad faith conduct as a trustee in opposing objections to her reports and in objecting to the successor trustee’s reports.  The 4/3 DCA panel found that the fees incurred by beneficiaries were necessary and reasonable.  Furthermore, bad faith had been demonstrated because former trustee had brought 19 separate objections to successor trustee’s accountings and did not prove any with supporting evidence.  (Prob. Code, § 17211; Powell v. Tagami, 26 Cal.App.5^th 219, 234 (2018).)

            In doing so, Justice Fybel penned an excellent discussion of how a fee claimant presents evidence so it is admissible as far as obtaining reimbursement for an attorney’s work.  Invoices and billing statements authenticated by attorneys (including an attorney who is familiar with a former attorney’s work, if that attorney died or was otherwise unavailable) will support a fee award so as to avoid a hearsay objection.  (See, e.g., Powell v. Tagami, 26 Cal.App.5th at 230 [attorney’s declaration attaching his billing statements as well as billing statements for other attorneys was sufficient basis to determine attorney fees award]; Horsford v. Board of Trustees of California State University, 132 Cal.App.4th 359, 396 (2005) [“[T]he verified time statements of the attorneys, as officers of the court, are entitled to credence in the absence of a clear indication the records are erroneous”]; Cates v. Chiang, 213 Cal.App.4th 791, 821-822 (2013) [trial court may award attorney fees for work performed by previous counsel based on later counsel’s reconstructed summary of their work]; Weber v. Langholz, 39 Cal.App.4th 1578, 1587 (1995) [declaration of counsel made under penalty of perjury and verified cost memorandum is sufficient to support award of attorney fees].)  One should also read Justice Fybel’s prior decision in Copenbarger v. Morris Cerullo World Evangelism, Inc., 29 Cal.App5th 1, 13 (2018) [reviewed in our October 20, 2018 post before it was certified for publication], where a trial court judgment was reversed because a client improperly attempted to authenticate attorney invoices such that there was no admissible evidence to support the judgment.

            However, in Bronson, $78,000 of the surcharges had to be excised from the judgment, otherwise affirmed, because no admissible evidence was introduced to support the awarded amounts. 

Civil Rights, Lodestar, Substantiation Of Reasonableness Of Fees: 9th Circuit Remands Post-Settlement Fee Award In Civil Rights Case For Determination of Reasonable Hourly Rate and Settlement Agreement Date To Determine Fees For Work on Unfiled Motions

There Was Humor Here—Ninth Circuit Agreed Attorney Petitioning For Fees Was Ill-Advised To Put In A Declaration By A Hawaiian Plumber About What The Plumber Charged!

            As you will see, there is some underlying humor simmering in Roberts v. City and County of Honolulu, No. 16-16179 (9^th Cir. Sept. 12, 2019) (published).

            What happened here is that plaintiff settled a civil rights action against Honolulu after trying to settle the matter even before filing a complaint, a factor we bloggers believe was important in the appellate court’s ultimate result.  After a complaint was filed, the parties reached a settlement agreement even though plaintiff’s counsel had begun drafting motions for preliminary injunction/judgment on the pleadings.  Plaintiff moved for attorney’s fees and costs of $40,191.43, which was opposed by Honolulu.  The magistrate recommended an award of $13,912.04 in fees and $400 in costs, after reducing the hourly rates being claimed and reducing for the two unfiled motions.  The district judge awarded $21,302.95, an increase of $7,390.91 from the magistrate judge’s recommendation. 

            The Ninth Circuit vacated and remanded because the correct legal standard was not followed.

            It agreed that the attorney has the responsibility to submit supporting evidence for requested hourly rates.  Plaintiff’s counsel submitted his own declaration, a co-counsel declaration, declarations from other Hawaiian attorneys familiar with counsel’s work, “and an (ill-advised) declaration from a plumber.”  (Tee hee!)  Plaintiff’s lead counsel’s declaration also referred to hourly rates in San Diego, the Laffey Matrix describing D.C. area rates, and the plumber’s affidavit (the inclusion of which was even described as “inexplicable” by the Ninth Circuit panel).  In its award, the district judge ignored this inapt proof but relied on the hourly rates awarded to the two attorneys in other civil right cases in the District of Hawaii.  This reliance was error—examination of prior fee awards was not an acceptable substitute for considering the declarations actually submitted and explaining why those declarations did not establish the prevailing hourly rate in the district.  So, the matter had to be remanded so that the correct legal standard could be applied to the case. 

            With respect to the time spent on the two unfiled motions, the Ninth Circuit panel remanded because it was a “close question” on whether this time should have been compensated given the status of pending settlement discussions. 

            The moral of this one may well be this:  Don’t submit plumber declarations in support of a fee motion!

Choice Of Law: Prevailing Texas Defendant Sued In California For Dispute Centered In Texas Did Not Meet Its Burden To Show Civil Code Section 1717 Fee Denial Was Incorrect

Defendant Did Not Satisfy Nedlloyd Interest Analysis To Swing The Scales Back To California.

            This next case may have limited utility because its result really hinged on defendant’s failure to meet its burden of proof under the appropriate choice-of-law analysis.

            In River Oaks Self-Storage TIC 4, LP v. River Oaks Storage, LLC, Case No. A155418 (1^st Dist., Div.2 Sept. 12, 2019) (unpublished), defendant—a Texas LLC alleged to have a business presence in California—was sued by three out-of-state entities involving disputes under a Tenant In Common Agreement and LLC Agreement relating to a self-storage property facility in Texas.  Defendant defeated plaintiffs’ TIC Agreement claims on demurrer, and plaintiffs voluntarily dismissed the LLC Agreement claims on the eve of a defense summary judgment motion.  Defendant then moved for $201,003 in fees as the prevailing party under the two written agreements, a request denied in entirety by the lower court.

            The 1/2 DCA affirmed on narrow grounds.

            Defendant first relied on a Texas statute which only unilaterally applies to prevailing plaintiffs, but argued it was reciprocal based on California Civil Code section 1717, and then the TIC Agreement which only applied to tenants in common.  (The trial judge determined that defendant was not a tenant in common, so the TIC Agreement theory did not work.)

            The appellate court determined that defendant had not made enough of a nuanced argument to show whether Texas or California had a greater interest in the dispute so as to justify fees, which means the fee denial order had to be affirmed.  It did discuss the conflicting ABF Capital decisions (see our Choice of Law category for a discussion of these two Second District decisions), but simply determined that defendant did not show why Texas law rather than California reciprocity principles should apply given the competing interests of both states.  That result was likely salted by the fact that the dispute involved Texas property. 

Family Law: $10,000 Needs-Based Fee Award To Wife Reversed Because Family Court Failed To Make Mandatory Findings Required Under Family Code Sections 2030/2032

Fifth District’s Morton Decision Found Persuasive To The 4/1 DCA.

            The Fourth District, Division 1 in Marriage of Bustillo, Case No. D075369 (4^th Dist., Div. 1 Sept. 12, 2019) (unpublished) reversed a $10,000 “needs-based” fee award to ex-wife under Family Code section 2030 and 2032 for a multiday support hearing.  The reason was that the family law judge failed to make mandatory findings for needs-based awards as detailed in In re Marriage of Morton, 27 Cal.App.5^th 1025, 1049-1054 (2018), a Fifth District decision which the 4/1 DCA found to be well-reasoned and persuasive.  Morton is must reading for family law practitioners, in our view, when asking for pendente lite fee awards of this nature.

Sanctions: Under 2014 Version Of CCP § 128.5 (Objective Standard Only), Trial Judge Correctly Imposed Sanctions Against Plaintiff For Filing A Complaint Without Evidentiary Support

Sanctions Order Was $27,253.51 In Fees/Costs, Out Of A Requested $36,304.11.

            We have seen an uptick in appeals involving CCP § 128.5 in the last several months, with California’s intermediate appellate courts dealing with the differences in the 2014 and 2017 versions of the statute.  In Avalanche Funding, LLC v. Swickard, Case No. C083954 (3d Dist. Sept. 12, 2019) (unpublished), the Third District was dealing with the 2014 version of section 128.5.

            The case involved an underlying dispute over grazing rights on rangeland in Lassen County, with the Third District (as the Fifth and the Second, Division 6) frequently addressing cases in more rural, agricultural areas. 

            In this one, the trial judge wanted to see evidence that a reservation of grazing rights was in plaintiff’s chain of title, sustaining a demurrer with leave so as to inspire plaintiff to request a dismissal of its complaint without prejudice eight days later.  Defendants moved for section 128.5 sanctions against plaintiff, requesting $36,304.11 in attorney’s fees and costs.  The trial judge granted the motion, awarding instead $27,253.51 ($25,000 in fees and the remainder in costs).

            The Third District affirmed.  The 2014 version only required an objective standard (rather than both objective and subjective), but plaintiff’s complaint was filed without evidentiary basis to claim defendant had no grazing rights reservation given that the right to pasture cattle on land belonging to another is a profit a prendre of indefinite duration.  That plaintiff dismissed its action without prejudice was fine, with nothing demonstrating the trial judge was punishing plaintiff for exercise of that right.  The amount of the sanctions was no abuse of discretion, given that the trial judge did reduce the request by defendant.

            BLOG OBSERVATION—In a footnote, the Third District observed that the 2017 amendment to section 128.5 may have resulted in a change such that both objective and subjective standards had to be satisfied, but it did not have to reach that issue.  We commend readers to consult Marriage of Sahafzadeh-Taeb and Taeb, Case No. A152178 (1^st Dist., Div. 2 Aug. 26, 2019) (published) [discussed in our August 26, 2019 post], which held that the 2017 amendment does have both objective and subjective standards needing to be satisfied.

Sanctions: Lack Of Reporter’s Transcript Of Trial Proceedings Doomed Challenge To CCP § 128.5 Sanctions Order For Plaintiff Prosecuting A Frivolous Discrimination Claim

Trial Judge Awarded $36,037.54 In Fees (Out Of Requested $298,649) And $18,524.13 (Out Of Requested $54,986.19) To Defendant, Assessed Jointly And Severally Against Plaintiff And Her Attorneys.

            The lack of an adequate record doomed an abuse of discretion challenge by plaintiff to a CCP § 128.5 sanctions order in Cabrera v. Popchips, Inc., Case No. B286222 (2d Dist., Div. 7 Sept. 11, 2019) (unpublished).

            What occurred is that plaintiff bringing a multi-count FEHA/discrimination case beat a defense summary judgment motion, but she lost on all counts when the jury returned a verdict in favor of two defendants.  The major business defendant Popchips brought a section 128.5 motion for bad-faith tactics against plaintiff and her attorneys based on the case being frivolous as demonstrated by the jury verdict, requesting $298,649 in attorney’s fees and $54,985.19 in costs.  The lower court granted the motion, but only with respect to the discrimination claim.  The sanctions order, made jointly and severally against plaintiff and her attorneys and in favor of Popchips, was for $36,037.54 in fees—12% of the request (unlike the defense advocating 75% of the total request)—and $18,524.12 in expert fees/costs.

            Plaintiff appealed, with the 2/7 DCA affirming. 

            Plaintiff first argued that the denial of the summary judgment motion was dispositive in showing there was no bad faith prosecution of the action.  Not so, said the appellate panel, because sometimes the unfounded nature of a case is only revealed after a trial and an adverse trial result.  (Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, 91 Cal.App.4^th 859, 866 (2001); Bond v. Pulsar Video Productions, 50 Cal.App.4^th 918, 923 (1996).)  The other principal argument was that the sanctions order was an abuse of discretion, but this one was submarined by plaintiff’s failure to provide a reporter’s transcript of the trial proceedings (presenting only selective trial exhibits, with no indication of which ones were admitted into evidence) such that an inadequate record was presented for review of the issue.

Discovery, Sanctions: Failure To Designate The Deposition Video In The Appellate Court Doomed Challenge To $11,000 Sanction For Unilaterally Terminating A Videotaped Deposition

Motion To Augment The Record To Include The Video, One Day After The Appellate Argument, Was Deemed Untimely.

            Genesis Media, LLC v. Misle, Case No. B294620 (2d Dist., Div. 3 Sept. 10, 2019) (unpublished) is an appeal from a discovery sanction where an inadequate appellate record and untimely motion to augment sealed the fate of the sanctioned parties.

            However, the facts are interesting to say the least. 

Plaintiff Genesis Media, whose founder was Howard Misle, filed a breach of contract action against Ownzones Media and an individual in connection with Ownzones’ agreement to produce and operate a cannabis-focused media and lifestyle business.  Defendant Ownzones noticed Mr. Misle’s videotaped deposition in Las Vegas at the defense firm which had an armed security guard in the firm’s lobby.  A kerfuffle then ensued, with Mr. Misle apparently leaving the deposition room before any question could be answered based on the security guard’s presence in the law firm lobby.  Ultimately, plaintiff’s attorney terminated the deposition because the security guard was not removed from the lobby.  Plaintiff moved to compel the deposition and for resultant sanctions, even though no protective order motion was filed by the defense (although defense counsel claimed he suspended the deposition in order to seek a protective order).  The lower court reviewed the deposition video, granting the motion to compel and sanctioning Mr. Misle, plaintiff, and plaintiff’s counsel, jointly and severally, in the reduced amount of $11,000—expressly finding that the deposition video confirmed defendant counsel’s account of events leading to the motion to compel. 

            Mr. Misle and plaintiff’s counsel appealed, but they failed to designate the deposition video.  Big mistake.  The sanctions award was affirmed based on an inadequate record.  However, appellants obviously sensed at the appellate argument that they should have designated the video, bringing a motion to augment the record with the video one day after the oral argument.  This was denied as untimely.  (Regents of University of California v. Sheily, 122 Cal.App.4^th 824, 826 n. 1 (2004).) 

Appealability, Receivers: $92,952 In Receivership Fees Affirmed In Judgment In Favor Of Landlord Elks Building Association Of Santa Ana And Against Tenant JK Properties

Appealing Both Merits And Fee Judgments Was Properly Done Here; Special Benefit Doctrine Was Not Proven By Tenant.

            In Elks Building Association of Santa Ana v. J.K. Properties, Inc., Case No. G056187 (4^th Dist., Div. 3 Sept. 10, 2019) (unpublished), tenant JK Properties assumed a lease to the Saddleback Inn in Santa Ana, whose landlord was the Elks Building Association of Santa Ana.  The Saddleback Inn, although visited by Presidents Nixon and Reagan in its glory days, was likely being illegally used as an apartment complex rather than a motel—with a 2011 fire severely damaging the building on the property.  JK was able to recover almost $2.9 million in insurance proceeds, but the City of Santa Ana ordered JK to demolish all four buildings (with JK defying this order for three of the remaining buildings because the fourth building was almost gone and was demolished by JK).  Apartment squatters stayed on, with the City obtaining a receiver to attend to the property.  Believe it or not, a second fire occurred, damaging the remaining buildings such that the receiver borrowed over $1.2 million to demolish the entire property.  Elks then sued JK for unpaid rent, receivership costs, receivership attorney’s fees, unpaid property taxes, the $2.9 million in JK-received insurance proceeds (given the lease specified that the buildings be returned intact to landlord), and prejudgment interest.  The lower court awarded almost $6 million in damages to Elks, with $92,952 being receivership attorney’s fees.  JK appealed.

            The 4/3 DCA affirmed, in an opinion authored by Justice Bedsworth.

            First of all, it did observe that JK properly separately appealed both the merits and fee judgments such that it preserved challenges to both—something we bloggers have advocated all along the way.  (Torres v. City of San Diego, 154 Cal.App.4^th 214, 222 (2007).)

            JK’s principal argument on appeal was that it conferred on the Elks the special benefit of free demolition, given that landlord was able to sell the property for about $4 million more because the expense of demolition had been spared.  There were two problems with the argument: (1) the underlying facts were not proven at trial (given that the sale involved both an inn and adjoining lodge parcel, with no apportionment on a valuation basis); and (2) the receiver did the yeoman’s work of demolition such that the special benefit doctrine was not causally demonstrated.  With respect to fees, that award stood given the failure to reverse the damages award to any extent.

            BLOG OBSERVATION—Kevin A. Day and Jacob M. Clark of AlvaradoSmith were the winning attorneys on appeal, and we believe they were both involved in the trial on this matter.  Congratulations!

Private Attorney General, Civil Rights: Plaintiffs’ Bane Act/Whistleblower Retaliation Victories Justified An Award Of Attorney’s Fees Under CCP § 1021.5

$1,054,286.88 Was Fee Award Affirmed Against Los Angeles.

           Two fired Department of Transportation hearing examiners sued the City of Los Angeles under the Bane Act and for whistleblower retaliation, claiming that the City pressured them to change adverse decisions in hearings on parking citations.  They won their claims before a jury which awarded them total compensatory damages of $427,162, with the lower court later awarding them attorney’s fees in the sum of $1,054,286.88.

            City’s appeal of the merits and fee awards were unsuccessful in Hawkins v. City of Los Angeles, Case Nos. B279719/B282416 (2d Dist., Div. 3 Sept. 9, 2019) (unpublished).

            The fee award was justified under CCP § 1021.5, California’s private attorney general statute.  A significant benefit was conferred on the public by a verdict which vindicated the principle that administrative tribunals should be impartial and not have their decisions subject to influence based on municipal revenue concerns.  Fee award affirmed, showing that these types of awards do not have to be proportional at all when there is a substantial benefit conferred on the public in general.

Employment, Multipliers, Substantiation Of Reasonableness Of Fees: FEHA Plaintiff Properly Awarded Fees At Reduced Hourly Rates, But Augmented By Hourly Rates For Enhancement Factors, And Then Correctly Denied Any Multiplier Beyond That

Almost $1.5 Million In Fees/Costs Sought, But Ultimate Affirmed Award Was About $649,000.

            The next case is an interesting example of how a trial judge’s decision to not credit prior fee awards to an employment contingency attorney was affirmed because there was not sufficient foundation to show the prior awards were similar to the case under scrutiny, but provided a positive enhancement to hourly rates to make up for the contingency risk factor.

            In Navarro v. 4Earth Farms, Inc., Case No. B288105 (2d Dist., Div. 5 Sept. 4, 2019) (unpublished), a FEHA plaintiff won a jury verdict of $309,310 against certain defendants.  Filling emboldened, plaintiff’s counsel then moved for attorney’s fees of $1,473,315, inclusive of a 2.0 positive multiplier, against the non-prevailing defendants, with hourly rates requested which ranged from $450-850 per hour.  Plaintiff’s counsel supported these rates with a list of 10 recent fee awards the firm had received from other courts.  The trial judge found the rates to be too high in a tentative decision, but he wanted to give further thought to the multiplier request.  Later, the lower court awarded lower hourly rates to plaintiff’s lawyers, but it enhanced them somewhat for “multiplier” factors after observing the case was not complex and was a single plaintiff case (mainly, for contingency risk).  Ultimately, it awarded $649,020.62 in fees and costs to plaintiff.

            The 2/5 DCA affirmed.

            Although acknowledging that prior fee awards could be relevant (Margolin v. Regional Planning Com., 134 Cal.App.3d 999, 1005-1006 (1982)), the appellate court affirmed the trial court’s conclusion that plaintiff’s counsel did not give an “apples to apples” comparison—the listed cases were class actions unlike the involved single plaintiff case with not as much complexity, such that the similarity nexus was missing.  Also, even though most trial judges simply award a multiplier after reductions, the trial judge here did not discount any hourly work effort tasks at all but simply applied a higher hourly rate as an enhancement—something perfectly proper under California law.  (Horsford v. Board of Trustees of California State University, 132 Cal.App.4^th 359, 394-395 (2005).)  So, the fact that he did not apply a multiplier, but enhanced the hourly rates beyond what he considered reasonable, was no abuse of discretion.  

Liens For Attorney’s Fees, Settlement: Judgment Creditor’s Settlement And Release Of Judgment Debtor Did Not Release Interference Claims Against Judgment Creditor’s Attorney Obtaining Judgment Against Judgment Debtor

Interference Claim Was Righteous And Not Released By Judgment Debtor’s Unilateral Settlement With Judgment Creditor.

            Mancini & Associates v. Schwetz, Case No. B290498 (2d Dist., Div. 6 Sept. 4, 2019) (published) goes to show you that a client/judgment creditor has no ability to unilaterally release claims that client’s attorney has against a third-party judgment debtor. 

            Attorney obtained a substantial jury verdict for his client/judgment creditor against defendant/judgment debtor, with the attorney’s retainer agreement indicating that the attorney would receive a percentage of recovery and costs as well as an attorney’s lien against any recovery.  Without attorney’s knowledge or consent, client/judgment creditor entered into a settlement agreement with judgment debtor, releasing that party.  Judgment creditor’s attorney then sued judgment debtor for interference with his retention agreement and attorney’s lien rights, obtaining a $409,351 judgment against judgment debtor.

            On appeal, judgment debtor principally relied on the release in the settlement agreement with judgment creditor.  However, that agreement did not bind judgment creditor’s attorney who was not a party to the settlement, given that interference by a third party with attorney’s lien rights is a cognizable claim in California.  (Little v. Amber Hotel Co., 202 Cal.App.4^th 280, 291 (2011).)  As observed at the start of the opinion, “Does this release preclude the attorney from pursuing his costs and fees from the defendant [judgment debtor]?  Of course not.” 

Class Actions: With Respect to Removed Matters From State Court, Prospective Attorney’s Fees Allowable Under A Statute Or Contract Are To Be Considered For Determining Amount In Controversy For Removal Purposes

Ninth Circuit So Holds, Even Though There Does Seem To Be A Split Among Other District Courts.

            In Arias v. Residence Inn by Marriott, No. 19-55803 (9^th Cir. Sept. 3, 2019) (published), defendant filed a notice of removal of a state court wage/hour class action case to federal court.  It did so under the Class Action Fairness Act based on its estimate of damages and prospective attorney’s fees allowed under various labor statutes.  The district judge sua sponte remanded back to state court based on its view that the CAFA removal amount-in-controversy requirement was not met.  The Ninth Circuit reversed, determining defendant should have had the opportunity to present some proof on the amount-in-controversy threshold.  It also found that, notwithstanding a split among district courts, it had, in a prior opinion, countenanced the inclusion of prospective attorney’s fees allowable under a statute of contract for purposes of determining the amount in controversy.  (Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 F.3d 785, 788, 794 (9^th Cir. 2018).) 

Books: Co-Contributor Marc Reviews Three Books Relating To Government Regulation And Citizen Safety

The Book Reviews Are In The Current Issue Of California Litigation.

            Co-contributor Marc reviews three books in the current issue of California Litigation, Vol. 32, No. 2, 2019. With the permission of California Litigation, we make the article available if you click here. Any opinions expressed are those of the author alone, and for which the author alone, and not the California Lawyers Association, is responsible. 

            From the article:

    "Our government has been described as an insurance conglomerate and a large army. A core function of government is identifying and managing risk to protect the public from harm. The thread tying together the three books under review is government’s ability to manage risk. Dark Tide, about a horrific industrial accident, has been reissued in time to mark the 100th anniversary of the great molasses flood of 1919 that killed 21 people and devastated the North End of Boston. The Poison Squad, about the efforts to protect the public from dangerous and adulterated food, focuses on a heroic public servant. And, The Fifth Risk is about contemporary neglect, incompetence, and short-sightedness in federal agencies."

Prevailing Party: Settling Plaintiff Abandoning Some Claims, Suffering A Summary Adjudication, And Only Obtaining A Much Scaled-Back Settlement Payment On One Claim, Was Properly Found To Not Be A Prevailing Party For Fee Recovery Purposes

This Was A Discretionary Call, Which Was Affirmed; Appellate Court Refused To Find That Appellate Fees Were Appropriate Either, With An Interesting Discussion On Why Documents Were Improperly Sealed By Trial Court With Respect to Fee Proceedings.

            Although a settling plaintiff was found not be to a prevailing party for fee recovery purposes, the most interesting aspect of Hospodka v. J. Rockcliff, Inc., Case No. A153991 (1^st Dist., Div. 4 Aug. 30, 2019) (unpublished) is the appellate court’s determination that sealing the settlement agreement and fee proceedings was erroneous—strongly suggesting that there was no public importance circumstance which would support this in most civil cases as it relates to fee motion pleadings.

            Plaintiff sued to collect allegedly unpaid real estate commissions under an Independent Contractor Agreement with a contractual fees clause.  However, during the course of the litigation, she abandoned some claims and suffered an adverse summary adjudication on a claim, leaving only one claim against defendant for breach of contract for allegedly unpaid commissions on three real properties.  The parties agreed to a settlement, successfully lobbying the trial court to allow the settlement agreement and fee motion paperwork to be filed under seal.  Plaintiff moved to recoup fees of $181,172.00, but the lower court denied that request based on the conclusion that she was not the prevailing party. 

            Plaintiff’s appeal was unsuccessful. 

            The 1/4 DCA first considered the sealing of records by the trial court and in the appellate court.  It found that was error because the lower court did not file the standards for sealing records as set forth in CRC 2.550 and because no basis for sealing on appeal was presented under CRC 8.46(b)(2).  It reasoned that generally such documents should be available to the public as with most other court records.  However, it ordered the records to be unsealed 60 days after issuance of the appellate remittitur unless the parties could obtain a proper sealing order from the lower court.

            With respect to the “no prevailing party” determination, plaintiff had sought more than $200,000 in damages as well as prejudgment interest and punitive damages, but she received much less under one claim under the settlement.  This was hardly an unqualified win, especially given that dismissed claims can be considered as far as determining if a party prevailed (even if no fee recovery could attend to the dismissed claims).  Beyond that, defendant did win some interim victories, which were also relevant to the prevailing party analysis.

            However, the appellate court decided no one would recover fees for winning on appeal.  The lower court determined there was no prevailing party, plus the order denying the fee motion was not an action to enforce a settlement term. 

Homeowner Associations: Adams Stirling Law Firm In Los Angeles Has An Excellent Summary Of Fee Shifting Provisions With Respect To HOA And Davis-Stirling Act Issues

Numerous Civil Code and CCP Provisions, As Well Case Law, Summarized By The Firm On Its Website.

            We would like to thank Adams Stirling, a Los Angeles law firm specializing in HOA issues, for its excellent summary of HOA and Davis-Stirling Act fees issues and case law, which we post verbatim below and which can be found on its Website.  We would note that the firm is headed by Adrian Adams and Hon. Larry Stirling (Ret.), who authored the Davis-Stirling Act legislation when he was a member of the California Legislature and before he was appointed as a judge (thereafter retiring and joining forces with Mr. Adams to form Adams Stirling).

            Thanks, Adams Stirling law firm for your synopsis below:

            American Rule. “With regard to an award of attorney fees in litigation, California generally follows what is commonly referred to as the ‘American Rule,’ which provides that each party to a lawsuit must ordinarily pay his or her own attorney fees.  The American Rule is codified in Code of Civil Procedure section 1021, which states in relevant part:  ‘Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .’”  (Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1142.) 

            Pre-Litigation Legal Fees. Neither owners nor associations are entitled to legal fees incurred in a dispute that does not lead to litigation. For example, each side hires a lawyer and exchanges a series of letters with demands and counter-demands. If the matter is resolved or dies away, neither side is entitled to their attorney's fees. Civil Code 5975 only authorizes a prevailing owner to recover their reasonable attorneys’ fees and costs following the conclusion of a successful action (i.e. lawsuit)

            If, however, the dispute turns into litigation, the prevailing party is entitled to reasonable attorney's fees as determined by the court and depending on the nature of the dispute. The starting point for calculating attorney's fees begins with pre-litigation ADR. Because the amount of the award is discretionary with the court, the prevailing party could incur $50,000 in legal fees but be awarded only $20,000 or less by the court. Parties should never enter into litigation believing they will recover their legal fees. Recovery is always uncertain.

STATUTES: The following statutes provide for attorneys' fees and/or costs:

ADR costs		Civil Code §5955
Anti-SLAPP motion		Code of Civil Procedure §425.16
Assessment collection		Civil Code §5650(b), §5740, §5650(a), §5705(a), §5715(a), §5720(a),  §5685, §5658
Governing document enforcement		Civil Code §5975
Contract actions		Civil Code §1717
Escrow Disclosure violations		Civil Code §4540
Discriminatory CC&Rs		Civil Code §4225
Disputed charges		Civil Code §5658
Flags		Civil Code §4705(c)
Foreclosure		Civil Code §5730(a)
Inspection of records		Civil Code §5235
Managing agent		Civil Code §5380
Records inspection		Civil Code §5145
Satellite dishes		Civil Code §4725(d)
Small claims appeal		Code of Civil Procedure §116.780
Solar energy		Civil Code §714

CASE LAW

Marina Pacifica v. S.C. Fin. Corp. (2018). A party's failure to obtain its litigation objective does not automatically make the other party the prevailing party.

Artus v. Gramercy Towers (2018). Neither the language of the Davis-Stirling Act, nor the legislative history of the fee provision Artus invokes, evidences any intent on the part of the Legislature to depart from well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.

Retzloff v. Moulton Parkway Assn (2017). Former board members sued their association alleging the board was conducting business outside of meetings and failing to maintain and provide certain corporate records. Plaintiffs failed to attempt ADR as required by Civil Code §5950. The association demurred and the court sustained without leave to amend. As prevailing party, the association moved for attorneys' fees. The Court of Appeal reversed the lower court's award of attorneys' fees concluding that Civil Code §5235 does not authorize a court discretion to award fees to a prevailing association. A plain reading of “any costs” as used in section 5235(c) does not support the inclusion of attorney fees as costs. Section 5235(c) entitles a prevailing association to costs, not attorney fees and costs.

Almanor Lakeside Villas Owners Association v. Carson (2016). Even though the court struck down 90% of the fines levied by the association against and owner for a rental violation, the court decided the key issue was the association's right to enforce rules and impose fines for violations, thereby making it the prevailing party.

            The Davis-Stirling Act does not define “prevailing party” or provide a rubric for that determination. In the absence of statutory guidance, California courts have analyzed analogous fee provisions and concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives. ( Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 ( Heather Farms); Salehi, supra, at pp. 1153–1154.) The California Supreme Court implicitly has confirmed this test. In Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94, the court affirmed the award of attorney’s fees in an action to enforce a restrictive covenant under the Davis-Stirling Act, stating: “We conclude the trial court did not abuse its discretion in determining that the Association was the prevailing party … . On a ‘practical level’ 13 [citation], the Association ‘achieved its main litigation objective.’ ” (Ibid. [quoting Heather Farms, at p. 1574 and Rancho Santa Fe Assn. v. Dolan-King (2004) 115 Cal.App.4th 28, 46].)

Nellie Gail Ranch OA v. McMullin (2016). Failure to appeal a fee ruling deprives an appellate court of jurisdiction to decide the fee challenge.

Rancho Mirage Country Club HOA v. Hazelbaker (2016). An association's lawsuit to enforce a settlement agreement entered into during ADR is deemed an action to enforce the governing documents under the Davis-Stirling Act, which entitles the association to recover reasonable attorneys' fees.

Tract 19051 Homeowners Assn v. Kemp (2015). Prevailing owner can recover attorney fees under Civil Code section 5975(c) in a case brought by association against owner to enforce governing documents even though the court found the association didn’t exist. The Supreme Court held the plain reading of 5975(c) supports that the award of attorney fees is reciprocal in an action where the association brings the claim to enforce the governing documents regardless of whether the association exists. The recovery is based solely on the association’s claim to enforce the governing documents and not based on determining whether the association is a common interest development.

Grossman v. Park Fort Washington Assn. (2013). Normally, any attorneys' fees incurred prior to the filing of the complaint are not awarded. Here, the court concluded that the pre-litigation ADR process mandated by the Davis-Stirling Act is the actual start of litigation. Accordingly, it awarded attorneys' fees expended by the homeowner expended in pre-litigation ADR.

Salehi v Surfside III (2011). Susan Salehi sued her association alleging 10 causes of action. Three days before trial, she dismissed eight of her ten claims against the association. The association spent approximately $250,000 defending against her claims. Three days before trial, Salehi dismissed eight of her ten claims. The association subsequently sought recovery of the legal fees it incurred defending against Salehi's dismissed causes of action. The trial court denied the association’s request but the court of appeal reversed. The appellate court found that the association was entitled to recover attorneys fees from Salehi, reasoning that a party suing to enforce the CC&Rs must get their “ducks in a row” both procedurally and substantively before filing suit. Salehi had done neither.

That v. Alders Maintenance Assn (2012). That brought a frivolous election challenge. As the prevailing party, the association sought attorney's fees under the Davis Stirling Act. The award of attorneys' fees is allowable only when authorized by contract, statute or law. If a statute refers to the award of "costs and attorney's fees," attorney's fees are an item and component of the osts to be awarded and are allowable as costs. The court reviewed the statute (now Civ. Code 5145(b)) and concluded the statute did not authorize associations to recover attorney's fees.

Bear Creek Planning Committee v. Ferwerda (2011). If empowering language is provided for in the CC&Rs, architectural committees may adopt standards beyond those set forth in the CC&Rs, i.e., it can adopt new design standards related to the improvement or development of lots. However, a committee may not unilaterally establish an attorneys’ fees provision for itself. Attorneys’ fees must be reciprocal and contractual--the committee's fee provisions did not seek to clarify existing language in the CC&Rs. Rather, it was an inappropriate attempt by the committee to insert a new provision that bound homeowners without their approval. Nothing in the CC&Rs gave the committee the power to insert into their architectural standards an attorney fee provision that was never in the CC&Rs.

Parrott v. Mooring Townhomes Assn. (2003). Plaintiff sought a preliminary injunction against his association. When he failed to receive one, he dismissed his complaint. The court awarded the association attorneys' fees. A prevailing party is one who prevailed on a practical level.

Mount Olympus POA v. Shpirt (1997). An owner does not have the right to recover attorneys' fees under the Davis-Stirling Act if his HOA is a voluntary association of homeowners having no power to charge or collect assessments. Such associations do not fit the definition of a common interest developments under the Act.

Heather Farms HOA v. Robinson (1994). The court declined to adopt a rigid interpretation of the term "prevailing party" and, instead, analyzed which party had prevailed on a practical level. The court concluded that a a voluntary mutual dismissals as part of a global settlement does not create a prevailing party.