Are Defense Fee Awards Encompassed Within the Appellate Automatic Stay or Must They Be Bonded?

California Law Is Unsettled: Fertile Area for Litigation, We Believe.

            The law is settled in two areas.  First, mere routine costs awards to the defense under Code of Civil Procedure section 1032 (for items such as filing fees, exhibits, etc.) are stayed and do not require an undertaking.  See Code Civ. Proc. sec. 917.1(d).  Second, routine costs (and, likely, attorney's fees awards) must be added to a money judgment for purposes of bonding.  Ibid.; see also Gallardo v. Specialty Restaurants Corp., 84 Cal.App.4^th 463, 466-467 (2000) [where judgment consists of expert witness fees awarded under CCP 998 and routine costs under section 1032, the undertaking need only be based on the amount of the section 998 costs].  However, what about a purely defense award of attorney's fees (defendant beat plaintiff for a zero judgment, but obtains a fee award against plaintiff)? California law is unsettled on this question, providing plenty of opportunity for trial and appellate arguments on both sides of the issue.

            Code of Civil Procedure section 917.1(a)(1) states the general rule that an appeal does not stay the enforcement of a money judgment unless appellant posts an undertaking, subject to an exception codified in section 917.1(d)¦no undertaking shall be required pursuant to this section solely for costs awarded under Chapter 6 (commencing with Section 1021) of [the CCP]. 

            Two earlier decisions, Pecsok v. Black, 7 Cal.App.4^th 456, 459-462 (1992) and Nielsen v. Stumbos, 226 Cal.App.3d 301, 304-305 (1990), held that defense attorney's fees awards were an element of costs, not  money judgments, entitled to protection under the appellate automatic stay.  However, Chamberlin v. Dale's R.V. Rentals, Inc., 188 Cal.App.3d 356, 361-362 (1986) entered the fray and came to a contrary conclusion:  attorney's fees awards, unlike incidental routine cost items, are in the nature of a directly litigated issue rather than merely incidental to the judgment.  Chamberlin, unlike Pecsok and Nielsen, found that attorney's fees awards which are not awarded in virtually every case to the prevailing party must be supported by an undertaking on appeal.

            This conflict, for a time, was resolved by the California Supreme Court in Bank of San Pedro v. Superior Court, 3 Cal.4^th 797 (1992), albeit in a section 998 context.  San Pedro held that collection of expert witness fees awarded under section 998 are non-routine costs not automatically stayed from enforcement efforts during appeal.  In important dictum, the state supreme court agreed that expert witness fees, like attorney's fees,are non-routine because (1) they are not ordinarily a part of costs awarded at trial; (2) they are not the type of costs included in virtually every case; and (3) they are a directly litigated issue as opposed to being an incidental matter.  Id.at 803.  In essence, San Pedro sided with Chamberlin in the debate over treatment of defense fee awards.

            Enter the Legislature with amendments of section 917.1 in 1993.  Code of Civil Procedure section 917.1(d) was amended to delete the undertaking requirement for costs awarded under Chapter 6 [of the CCP].  However, the Legislature codified San Pedro's holding by amending section 917.1(a)(2) to require undertakings for judgments involving costs awarded pursuant to [CCP] Section 998, excepting judgments solely for costs from the undertaking requirement.  No mention was made of San Pedro at all in the text of the statutory amendments.  Obviously, the amendment to section 917.1(d) raises the issue of whether the Legislature sub silencio abrogated San Pedro (and its routine/non-routine distinction).  We know of no decision directly addressing this issue, although there are some subsequent case law developments and commentary on the topic fodder supporting each side of the coin.

            In More Direct Response v. Callahan, published at 12 Cal.Rptr.2d 573 (4^th Dist., Div. 1 1992) but depublished later, an appellate panel held that a contractual attorney's fees judgment was stayed on appeal without a bond, reasoning that Chamberlin was supplanted by the 1993 legislative amendments discussed above.  Callahan squarely sided with the reasoning in Pecsok and Nielsen.  On April 15, 1993, however, the California Supreme Court depublished Callahan notwithstanding that the 1993 legislative amendments were in force.  Although one can read many things into depublication, it usually suggests the state supreme court disagrees with some part of the reasoning of the depublished case.

            Shortly after the 1993 amendments, one treatise observed:  Because CCP section 917.1(d) does not unequivocally exclude from the undertaking requirement a judgment solely for contractual or statutory fees, there is still room for respondent to argue against an automatic stay by citing the Supreme Court's reasoning in Bank of San Pedro.  (Eisenberg, Horvitz, Wiener) Cal.Prac. Guide:  Civil Appeals and Writs (The Rutter Group 1995 rev. #1) section 7.133.2, pages 7-34 to -35.)  Some years later, this same treatise accorded some more weight to the legislative amendments, suggesting that a fee award might well be a costs only judgment needing no undertaking.  (See Dowling v. Zimmerman, 85 Cal.App.4^th 1400 (2001), citing a later edition of the The Rutter Group appellate guide; see our June 23, 2008 post.) 

            More recently, another commentator synopsizes section 917.1(d), but then has a but see reference to San Pedro and Gallardo, supra, 84 Cal.App.4^th 463 for the proposition that an undertaking is required for some, but not other, costs.  (See Axelrad, Staying Enforcement During Appeal, Cal. Civil Appellate Practice (Cont.Ed.Bar 3d ed. May 2008) section 6.28, p. 340.)

            Even more intriguing is Presiding Justice Sills's scholarly discussion of San Pedro in Behniwal v. Mix, 147 Cal.App.4^th 621 (2007).  Although dealing with whether a contractual fee award is incidental to a specific performance judgment, the Fourth District, Division Three nevertheless traced the case law conflict leading up to San Pedro.  The appellate court then re-embraced the notion that expert witness fees (and surely, we can add, attorney fees) are always a matter of trial court discretion, even if awarded as a matter of right.  (Id.

 at 633.)  Justice Sills then offered this summary of the distinction between contractual fee awards and routine section 1033.5 costs:

                        Further, the three points concerning the nature of fees awarded

                         pursuant to right and otherwise described as costs under

                         section 1717 and 1033.5 cannot be ignored:  The attorney fee

                         award here was a directly litigated issue; it was the subject of

                         a full hearing on remand.  Also, attorney fee awards are always

                         matters of discretion, even when a litigant has a right to them.

                         (Courts never award unreasonable attorney fees.) 

Id.at 634.  He summed up the appellate panel's reasoning this way:  We need only add that, in distinguishing directly litigated issues (like expert witness fees and attorney fees) from routine costs, the Bank of San Pedro decision validated a distinction impliedly drawn by the Kamper v. Mark Hopkins, Inc., supra, 78 Cal.App.2d 885[, 887-888], 178 P.2d 7867 [1947] decision 45 years previously:  The real judgment is matter directly involved in the litigation, as distinct from, say, a true incidental like the per-page cost of duplicating a reply brief.  (Behniwal, supra, 147 Cal.App.4^th at 634.)  This language in Behniwal can certainly be used to advocate that the routine/non-routine cost distinction is alive and well.

            As you can see, the undertaking issue is unsettled.  We have not looked at the legislative history of the 1993 amendments to section 917.1(d) to see if there is any mention of San Pedro, but that would be a productive exercise for practitioners who confront this issue in the right circumstances.

            BLOG BONUS COVERAGEAssuming that a contractual/statutory fee only award is covered by the automatic stay, what happens if a zealous attorney still engages in post-judgment enforcement proceedings such as recording a judgment abstract because of fears the opponent will lien up assets subject to execution during an appeal?  Can the attorney face tort exposure under abuse of process or slander of title theories?  The answer is no reason:  the absolute litigation privilege under Civil Code section 47 protects this type of activity.  Our Fourth District, Division Three so held in Keefe v. Kompa, 84 Cal.App.4^th 130 (2000), and the California Supreme Court subsequently resolved an appellate split in thinking and determined that Keefe was good law.  (See Rusheen v. Cohen, 37 Cal.4^th 1048 (2006).)