ENFORCEMENT OF SETTLEMENT STIPULATION BASED ON STATUTORY LABOR VIOLATIONS REAPS FEE AWARD WHEN DEFENDANT DEFAULTS

Second District Finds That Settlement Stipulation Justified Fee Entitlement and Rejected Challenges to Substantiation of Claimed Fees.

            A plaintiff enters into a settlement stipulation with defendant, agreeing only to waive fees and costs upon full payment.  Defendant does not pay.  Plaintiff obtains an order enforcing the settlement agreement payment terms and then moves for fees based on the underlying Labor Code violations alleged in the settled action.  Can plaintiff get fees for enforcing the agreement?  You bet, the next case held.

            Benson v. Little, Case No. B200308 (2d Dist., Div. 6 June 10, 2008) (unpublished), involved an appeal from an order enforcing a stipulated judgment and awarding fees and costs to the plaintiff as the prevailing party under Labor Code sections 218.5 and 2699. 

            Plaintiff was a construction superintendent at defendant developer.  Plaintiff had an equity deal in sales in a future development of developer.  After plaintiff was terminated, he filed a complaint based on Labor Code violations, also seeking attorney’s fees under Labor Code sections allowing a successful plaintiff to recover for unpaid wages and as an attorney general pursuing unpaid wage claims.  (Lab. Code secs. 218.5, 218.6, 2699.)  The parties reached a settlement agreement under which plaintiff would be paid as certain properties were sold or could restart the litigation if no sales occurred by a specified date.  Importantly, plaintiff only agreed to dismiss the case with prejudice upon payment, only then agreeing to waive claims for fees and costs. 

            A dispute then arose about whether developer owed plaintiff payment upon gross or net proceeds of sales.  The trial court found developer was in default for not paying  plaintiff upon realization of gross sales proceeds, entering judgment upon plaintiff’s motion to enforce settlement.  Plaintiff then sought $30,000 in attorney’s fees as the prevailing party under Labor Code sections 218.5 and 2699.  Plaintiff supported the fee request with attorney declarations showing the fees incurred and their hourly rates, as well as attaching redacted billing records that itemized services performed.  Defendant primarily argued four things in opposition to the fee request:  (1) there was no prevailing party because of the settlement; (2) the attorney declarations were insufficient substantiation; (3) plaintiff had not apportioned fees between the Labor Code claims and other noncompensable claims; and (4) the fees were unreasonable in amount when compared to the settlement amount of $75,000.

            The trial court awarded $17,000 in fees, finding plaintiff was the prevailing party under the Labor Code sections but reducing the sought-after amount “based on general fairness” because the matter had not been “litigated to the extent that would normally justify the amount of fees that are being requested.”

            On appeal, defendant lost all of its fee challenges.

            First, the Second District panel found that plaintiff prevailed on statutory Labor Code claims, citing On-Line Power, Inc. v. Mazur, 149 Cal.App.4^th 1079 (2007) for the proposition that statutory fees may be awarded to a party who obtains “net monetary relief” pursuant to a settlement.  Based on the statutory authorization of fees in sections 218.5 and 2699, the appellate court concluded “[a]ttorney’s fees should not be denied on claims for unpaid wages simply because failure to pay constituted breach of a contract.”  (Slip Opn., at p. 6.)  (BLOG OBSERVATION—Put another way, the Court of Appeal took cognizance of the fact that plaintiff did not waive fees and costs until there was payment, preserving the ability to recoup fees under the Labor Code sections should there be a default under the settlement stipulation.)

            Next, the Ventura-based court rebuffed the argument that the attorney declarations were insufficient.  The declarations were competent in establishing the attorney professional qualifications, hourly rates, itemized billing statements, and history of the case.  This evidence gave the trial court sufficient basis to assess the reasonableness of the hours claimed. 

            Last, the trial court was justified in reducing the lodestar (see our June 7, 2008 post for the derivation and definition of the word) from $30,000 to $17,000.  The lower court did state the reasoning for his “fairness” reduction, which sufficed.  (Slip Opn., at p. 8.)

            The last line of the opinion sums it, and well describes the standard of review most frequently utilized in these cases:  “There was no abuse of discretion.”

             

            

Second District Finds That Settlement Stipulation Justified Fee Entitlement and Rejected Challenges to Substantiation of Claimed Fees.

            A plaintiff enters into a settlement stipulation with defendant, agreeing only to waive fees and costs upon full payment.  Defendant does not pay.  Plaintiff obtains an order enforcing the settlement agreement payment terms and then moves for fees based on the underlying Labor Code violations alleged in the settled action.  Can plaintiff get fees for enforcing the agreement?  You bet, the next case held.

            Benson v. Little, Case No. B200308 (2d Dist., Div. 6 June 10, 2008) (unpublished), involved an appeal from an order enforcing a stipulated judgment and awarding fees and costs to the plaintiff as the prevailing party under Labor Code sections 218.5 and 2699. 

            Plaintiff was a construction superintendent at defendant developer.  Plaintiff had an equity deal in sales in a future development of developer.  After plaintiff was terminated, he filed a complaint based on Labor Code violations, also seeking attorney’s fees under Labor Code sections allowing a successful plaintiff to recover for unpaid wages and as an attorney general pursuing unpaid wage claims.  (Lab. Code secs. 218.5, 218.6, 2699.)  The parties reached a settlement agreement under which plaintiff would be paid as certain properties were sold or could restart the litigation if no sales occurred by a specified date.  Importantly, plaintiff only agreed to dismiss the case with prejudice upon payment, only then agreeing to waive claims for fees and costs. 

            A dispute then arose about whether developer owed plaintiff payment upon gross or net proceeds of sales.  The trial court found developer was in default for not paying  plaintiff upon realization of gross sales proceeds, entering judgment upon plaintiff’s motion to enforce settlement.  Plaintiff then sought $30,000 in attorney’s fees as the prevailing party under Labor Code sections 218.5 and 2699.  Plaintiff supported the fee request with attorney declarations showing the fees incurred and their hourly rates, as well as attaching redacted billing records that itemized services performed.  Defendant primarily argued four things in opposition to the fee request:  (1) there was no prevailing party because of the settlement; (2) the attorney declarations were insufficient substantiation; (3) plaintiff had not apportioned fees between the Labor Code claims and other noncompensable claims; and (4) the fees were unreasonable in amount when compared to the settlement amount of $75,000.

            The trial court awarded $17,000 in fees, finding plaintiff was the prevailing party under the Labor Code sections but reducing the sought-after amount “based on general fairness” because the matter had not been “litigated to the extent that would normally justify the amount of fees that are being requested.”

            On appeal, defendant lost all of its fee challenges.

            First, the Second District panel found that plaintiff prevailed on statutory Labor Code claims, citing On-Line Power, Inc. v. Mazur, 149 Cal.App.4^th 1079 (2007) for the proposition that statutory fees may be awarded to a party who obtains “net monetary relief” pursuant to a settlement.  Based on the statutory authorization of fees in sections 218.5 and 2699, the appellate court concluded “[a]ttorney’s fees should not be denied on claims for unpaid wages simply because failure to pay constituted breach of a contract.”  (Slip Opn., at p. 6.)  (BLOG OBSERVATION—Put another way, the Court of Appeal took cognizance of the fact that plaintiff did not waive fees and costs until there was payment, preserving the ability to recoup fees under the Labor Code sections should there be a default under the settlement stipulation.)

            Next, the Ventura-based court rebuffed the argument that the attorney declarations were insufficient.  The declarations were competent in establishing the attorney professional qualifications, hourly rates, itemized billing statements, and history of the case.  This evidence gave the trial court sufficient basis to assess the reasonableness of the hours claimed. 

            Last, the trial court was justified in reducing the lodestar (see our June 7, 2008 post for the derivation and definition of the word) from $30,000 to $17,000.  The lower court did state the reasoning for his “fairness” reduction, which sufficed.  (Slip Opn., at p. 8.)

            The last line of the opinion sums it, and well describes the standard of review most frequently utilized in these cases:  “There was no abuse of discretion.”