Insurance: Brandt Fees—Provide Your Fee Agreement … Or Risk Bad Things!

Fourth District, Division One, in Unpublished Decision, Strongly Urges Disclosure of Fee Arrangement Between Client and Attorneys in Brandt Setting.

     In our category “Insurance,” we previously explored an insured’s ability to recoup Brandt fees for pursuing the benefits of contractual benefits under an insurance policy. In fact, the co-contributors to this blog have written an article last year, in California Litigation, addressing many of the issues that arise in this area of the law. (See our post of November 13, 2008.) Now, we report on an unpublished decision that strongly urges all prevailing insureds to reveal their fee arrangement to lower courts considering Brandt fee awards.

     Leeper-Johnson v. Prudential Insurance Co. of America, Case No. D051166 (4^th Dist., Div. 1 May 13, 2009) (unpublished) involved a plaintiff winning a judgment of more than $15 million against Prudential based on breach of contract and insurance bad faith claims. $14 million of the judgment represented punitive damages, a sum which was reduced by the trial court to $4 million (not accepted by plaintiff)—a 3:1 punitive-to-compensatory damage ratio that was deemed proper notwithstanding reversal of a past economic damages component and elimination of attorney’s fees (which were remanded, as we discuss below). However, plaintiff also was awarded costs and $548,408.84 in attorney’s fees, also challenged by Prudential on appeal.

     Prudential won a remand for reconsideration of the fee award.

     On appeal, the insurer argued that plaintiff failed to carry her burden of proof because she refused to disclose her fee arrangements with counsel, even though insured claimed the arrangements were privileged. The Fourth District, Division 1 agreed with Prudential.

“ … by claiming Brandt fees as part of her compensatory damages award [insured] placed the fee agreements at issue and fundamental fairness requires their disclosure.” (Slip Opn., at p. 46, citing Steiny & Co., Inc. v. California Electric Supply Co., 79 Cal.App.4^th 285, 292 (2000); Wellpoint Health Networks, Inc. v. Superior Court, 59 Cal.App.4^th 110, 128 (1997).)

     Because the trial court needed to have the fee arrangements to follow the Brandt/Cassim formulas, the contingency fee percentage actually agreed upon had to be disclosed so that the proper calculation could be made. So, a remand was necessary on this issue. (However, the appellate panel did note that the trial court needed to be “sensitive” to certain allocation issues when plaintiff’s counsel worked for hourly rates and with respect to apportioning out certain tort claim time.)