Second District Reverses Awarding Almost $100,000 To One Partner’s Attorney Where Action At Issue Did Not Involve a Fee Award Against Other Partners.
In a rather complicated set of facts, certain partners sued other partners in an oral partnership involving a property and business. Plaintiffs won their oral partnership claims, with the trial court appointing a receiver and ordering the sale of the receivership business and real property. Defendants (the other partners) bought the business and real property from plaintiffs, with $993,973 remaining after distribution of proceeds and other partnership assets. The trial court then ordered distribution of $637,389 to one partner and his attorney Mr. Drexler, with $173,543.50 being accountable for most of the fees and costs incurred by the one partner (and owed to Mr. Drexler) for winning a prior specific performance action against an unrelated party (the Akopyan action). The trial court ordered this amount paid out of the receivership estate, with the defendants contributing 4/7ths of the $173,543.50 sum (or a little shy of $100,000). The aggrieved partners appealed this ruling, as well as others, and obtained a reversal on the 4/7ths fee distribution order.
The Second District, Division Three, in a 3-0 decision authored by Presiding Justice Klein, overturned the fee distribution order. The decision is Gumrikyan v. Kesheshyan, Case No. B196783 (2d Dist., Div. 3 July 17, 2008) (unpublished).
The Akopyan action involved a specific performance action brought by an outside buyer who agreed to purchase the business and real property from one of the plaintiff partners who was record owner. Buyer lost and was ordered to pay $187.146.50 in fees and costs to plaintiff partner. Buyer was defunct, so plaintiff partner (and Mr. Drexler, his attorney) sought to be paid out of the receivership estate under the theory that there would have been no property to sell if buyer had been successful. Other partners objected on the basis they did not retain Mr. Drexler in Akopyan, an objection that the trial court overruled in ordering the receivership distribution of $173,543.50 ($100,000 being the 4/7ths contribution of the nonsuing partners in Akopyan).
Based on the structural realities of the Akopyan litigation, a reversal was warranted. Justice Klein found that the partnership was not a party in the prior litigation, the attorney’s fees award was only against Akopyan (not the partnership), and nothing showed the partnership retained Mr. Drexler as their counsel in the prior case. Accordingly, the appellate panel reversed the order charging the other partners with 4/7ths of the $173,543.50 in fees awarded to Mr. Drexler for the Akopyan litigation.
Call it common sense, but this decision illustrates that litigants and their winning attorneys need to focus fee recovery against the losing party, not peripheral players not involved in the case producing the fee award in the first place.
(BLOG BONUS COVERAGE—This unpublished decision also has a nice discussion about the binding impact of judicial admissions made in pleadings. Justice Klein quotes no less an authority than Justice Corrigan (when she was an intermediate appellate jurist), who summed it up well in Valerio v. Andrew Youngquist Construction, 103 Cal.App.4th 1264, 1271 (2002): “Because an admission in the pleadings forbids the consideration of contrary evidence, any discussion of such evidence is irrelevant and immaterial. When a trial is had by the Court without a jury, a fact admitted by the pleadings should be treated as ‘found” ….”.)
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