In our “Cases: Fee Substantiation” category, we have reviewed past decisions showing that California has a fairly “loosey goosey” standard for substantiating the amounts claimed in attorney’s fee petition requests. However, the next case illustrates that an unrebutted detailed opposition on the substantiation issue can help even an appellate court to conclude that the trial court abused its discretion in awarding substantial fees to the prevailing party.
Rossa v. D.L. Falk Construction, Inc., Case No. A116151 (1st Dist., Div. 2 Sept. 9, 2008) (unpublished) involved a contest over the reasonableness of requested attorney’s fees, not entitlement—there was a clear contractual fee clause resolving the entitlement issue in plaintiffs/respondents’ favor.
The germane facts go this way. Disgruntled homeowners sued their prime contractor on numerous theories, after contractor abandoned the project and owner completed the project on their own. Owners sought to recover about $688,272 in damages. Owners settled an encroachment claim based on a missurvey by another defendant, prior to trial, for $185,000 (way less than their expert’s calculations), with the settlement being confirmed as a good faith settlement that would be “credited” against any ultimate judgment in owners’ favor. At the conclusion of evidence in a jury trial, homeowners dismissed three warranty claims. A jury found for owners and against contractor, on a breach of contract claim, in the sum of $100,000. However, the jury also returned a defense verdict in favor of contractor and against owners on a negligence (construction defect and delay) count.
Owners were awarded $45,344 in routine costs (unopposed by contractor). Owners then sought $681,390.15 in attorney’s fees and other expenses, broken down as the $45,344 in routine costs, $133,250.66 in costs “not on cost bill,” $500,170.49 in trial attorney fees, and $2,625 in fees by expert witness Richard Pearl (who authored the CEB treatise on “California Attorney Fee Awards” and provided a declaration to owners on the propriety of hourly rates charged by owners’ successful attorneys). Significantly, no attorney time sheets or other detailed records were submitted with the moving papers.
Contractor decided to devote a lot of resources to its opposition to owners’ fee request. They opposed on these grounds: (1) owners had failed to meet their burden of proof necessary to support a fee award; (2) the amount must be reduced because owners had limited success; (3) the amount must be reduced because owners did not prevail on the encroachment claim against contractor; (4) the amount must be reduced because owners lost the warranty and negligence claims; and (5) the amount must be reduced because there were litigation inefficiencies, over-complication of the trial, and duplicative efforts. Contractor submitted a lengthy opposition memorandum (citing Mr. Pearl as support on some occasions) and a 2000-page declaration from one of contractor’s counsel, which the appellate court dubbed as possibly being “the longest declaration in the history of California jurisprudence” (Slip Opn., at p. 10)—showing why substantial amounts of time had to be apportioned out to “losing” encroachment or negligence claims.
In reply, owners countered with a 6 ½ page memorandum and three page attorney declaration. Not much attention was devoted toward controverting the analysis in contractor’s opposition brief. However, owners did file a supplemental declaration with some billings, but billings that were so completely redacted that one could not even discern the nature of the services provided.
The lower court hearing was an interesting affair, although it certainly would not have been a good predictor of the ultimate result in the court below. The trial judge agreed that the supplemental billing information was uninformative, because it was redacted so severely. The lower court was also confused about why owners’ attorneys did not submit more meaningful information in light of defense challenges to the fee request.
Care to guess what happened next? (I will bet some litigators will get it right.) The trial judge awarded “full monty” fees and costs to owners in the sum of $681,390.15. He found that apportionment should “not be utilized where the action deals only with a pecuniary claim, and not a matter dealing with the public interest” and that it was inappropriate “to penalize plaintiffs because their attorney utilized multiple theories of defendant’s liability to recover damages but did not recover on each cause of action.”
The First District, Division Two’s opinion—a 3-0 decision authored by Justice Richman—is must reading for practitioners about the type of fee substantiation and opposition to the amount of a fee request that will persuade justices at the appellate level to overturn a suspect fee award.
Even under the deferential abuse of discretion standard, the appellate panel found that the trial judge actually ignored governing law in awarding everything that owners requested in fees despite a credible opposition from contractor. A reasonable attorney’s fee is what must be awarded, not the amount claimed or theoretically owing by the client to the attorney under the retainer or contingency fee agreements. (See Vella v. Hudgins, 151 Cal.App.3d 515, 521 (1984) [“it does not follow that the fees awarded must necessarily equal the full amount of the client’s obligation when the contract is enforceable.”].)
The first flaw with the trial court’s perspective, wrote Judge Richman, is the assumption that a lodestar approach only applies in “public interest” settings. Wrong, citing to PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1095 (2000) as well as Mr. Pearl’s own CEB treatise. In the situation before it, the appellate court could not discern whether the trial judge eliminated duplicative, wasteful or other noncompensable work—the specter of which was raised by the opposition—because of its erroneous “public interest” mindset.
It was also mistaken to not apportion under the circumstances. Owners’ counsel acknowledged that the contract case and the negligence case were different in nature. However, the germane contractual fee clause was narrow in nature, only extending to contractual “interpretation/enforcement” disputes rather than broader tort disputes arising between the parties. So, apportionment was a necessary task for owners in requesting fees.
Owners tried to beat apportionment by a very familiar retort—issues were so “interrelated” such that apportionment was impracticable. The main defect in this contention was that owners did not just lose on variant theories, but actually lost disparate claims. Where separate claims are won and lost, apportionment must be undertaken, Justice Richman reasoned on behalf of the 1/2 panel. (See Sokolow v. County of San Mateo, 213 Cal.App.3d 231, 248, 250 (1989); Bell v. Chula Vista Unified Sch. Dist., 82 Cal.App.4th 672, 689 (2000).)
The Court of Appeal next addressed the claim for $133,250.66 in “expert witness fees and costs.” Although the contractual fee clause would allow for recoverability of these costs, owners failed to plead and prove them as damages at trial, deficiently claiming them as costs after judgment. (See First Nationwide Bank v. Mountain Cascade, Inc., 77 Cal.App.4th 871, 878-879 (2000); Jones v. Union Bank of California, 127 Cal.App.4th 542, 551 (2005); Hsu v. Semiconductor Systems, Inc., 126 Cal.App.4th 1330, 1341 (2005); Carwash of America-PO LLC v. Windswept Ventures No. 1, LLC, 97 Cal.App.4th 540, 544 (2002).) Beyond that, many of the claimed non-expert costs had no support under the Code of Civil Procedure routine costs provisions, except for “some support services and paralegal time … includable within an award of attorneys’ fees ….”
(See City of Oakland v. McCullough, 46 Cal.App.4th 1, 7 (1996); see also our June 4, 2008 post about recovering paralegal fees as attorney’s fees in certain contexts.)
End result in Rossa? Reversed and remanded for further proceedings. Owners lost their $681,000 fees/costs award, and are likely to recover substantially less on remand (especially since the original trial judge is retired and the matter likely will be assigned to a new trial court having mainly the appellate decision to guide it on remand).
BLOG FAVORITE QUOTE IN DECISION—Owners criticized one of contractor’s attorney declarations for drawing “questionable statistical conclusions.” Justice Richman colorfully retorted: “It reminds one of Mark Twain’s recitation that there are ‘lies, damn lies and statistics.’” (Slip Opn., at p. 10 n. 6.)