CALIFORNIA ATTORNEY'S FEES

Broad Fees Clause And Failure To Challenge Excessiveness Of Fee To Winner Spells Trouble For Losing Country Club Members

 

Fourth District, Division 1 Affirms $779,955.97 Postjudgment Fees/Costs Award.

     The next case covers several cross-over issues: fees clause interpretation; apportionment between covered and noncovered claims; and reasonableness of fees.

     Here we go.

     In Urquhart v. Del Mar Country Club, Case No. D052711 (4^th Dist., Div. 1 Sept. 28, 2009) (unpublished), a couple who were members in the country club reached a settlement agreement with the Del Mar Country Club under which an easement dispute was resolved and country club allowed a membership to couple’s son under certain conditions. Couple initiated a lawsuit claiming, among other things, that country club was required to quitclaim some property to them under the settlement agreement and that country club terminated their memberships as retaliation for suing. Because the case involved primarily contractual interpretation, the trial court granted summary judgment to country club (a determination that was upheld on appeal). The lower court also ordered couple to pay country club postjudgment fees/costs totaling $779,955.97 (gulp!, broken down as $720,636.85 in fees and $59,319.12 in costs). Couple also appealed this award, naturally.

     The Fourth District, Division 1, unfortunately for couple, affirmed across the board.

     Based upon a very broad fees clause in the membership agreements between the parties, the appellate panel found that the parties can by contract agree that fees will be shifted in any litigation (whether sounding in contract or tort), although normally a more narrowly worded fees clause only encompasses contractual claims. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4^th 1338, 1341 (1992) [relying on Code of Civil Procedure section 1021].)

     Couple argued that the lower court erred in not apportioning country club attorney time between contract and tort claims. The problem here is that apportionment is a discretionary tool for the lower court, which does not have to do so where if it is impracticable to so divide when there are common legal and factual issues involved. (Bell v. Vista Unified School Dist., 82 Cal.App.4^th 672, 687 (2000).)

     Finally, in the one that may have hurt the most, couple challenged the fee award as outrageous in amount. Actually, the appellate court agreed that the “fees do appear rather astounding” for a dispute involving mainly contractual interpretation issues over a small amount of property subject to the easement controversy. However, couple waived the excessiveness challenge by failing to contest the attorney hourly rates or time expended at the lower court level. (City of Santa Paula v. Narula, 114 Cal.App.4^th 485, 494 (2003).)

     BLOG UNDERVIEW—The moral of this case is to make sure you make an excessiveness challenge, if contesting a fee recovery, with specific evidence or objections in the lower court. If not, you will likely be subject to a similar waiver argument or given “short shrift” attention by the appellate court. (Compare Christian Research v. Alnor, 165 Cal.App.4^th 1345 (2008), reviewed in our December 31, 2008 “Top Ten Decision” list, where Justice Aronson—in an oft-cited decision—sustained the ability of trial judges to make wholesale reductions in sought-after fees where specific challenges to excessiveness/unreasonableness were made.)

Real Estate Mediation Clauses: Fee Award To Winning Sellers Affirmed Because Sellers Did Show A Willingness To Mediate

 

Buyers' Failure to Respond to Sellers' Mediation Efforts Meant Mediation Clause Was Complied With.

     We have surveyed many cases in the past that have strictly enforced CAR form mediation clauses, those provisions requiring that the parties attempt to engage in mediation before going to court in order to be qualified for an attorney's fees award as the prevailing side. You will find them under our website category "Mediation."

     In Hovanesian v. Couveau, Case No. B209445 (2d Dist., Div. 7 Sept. 28, 2009) (unpublished), sellers prevailed over buyers (actually, assignees of earlier putative purchasers) in a real estate purchase dispute. There was a fees clause in the CAR form purchase agreement, but fees were conditioned on the parties mediating any disputes before proceeding to arbitration or court action. (CAR Form Agreement, paragraphs 17A and 22.) The lower court awarded sellers unspecified fees under these clauses.

     Buyers appealed, arguing that sellers refused buyers' invitations to mediate.

POOF!: Reversal Of $30 Million Interference Judgment Means Substantial Costs Awards Went POOF! Too

Costs Reversed For Redetermination After Future Retrial Or After Appellate Remand in Indian Casino Development Case.

     The Fourth District, Division One Court of Appeal recently reversed a $30 million interference judgment, based on an inconsistent jury verdict, in an Indian casino development drama that was played out in San Diego County Superior Court.

     After the jury verdict came in, the trial court awarded the winning tribe $205,930 in costs as against Harrah's (the losing defendant) and also awarded Caesar's (winning defendant) $69,356.20 in costs against tribe.

     Because a new trial was ordered, the costs award against Harrah's would have to be revisited after a retrial. Caesar's costs award was interwoven with the award to tribe, so the trial court on remand had to reconsider an award to Caesar's.

     The POOF! case is Pauma Band of Luiseno Mission Indians v. Harrah's Operating Co., Inc., Case No. D050667 (4^th Dist., Div. 1 Sept. 28, 2009) (unpublished).

Section 998 Offers: Court Of Appeal Finds $1,501 Pretrial Settlement Offer Was Reasonable And In Good Faith Where Jury Defenses Personal Injury Plaintiff On Causation Issue

998 Offer Was Made After Plaintiff Received Medical Treatment; Third District Affirms $58,821.98 Costs Award Against Plaintiff.

     Timing is everything in judging the reasonableness of Code of Civil Procedure section 998 offers, as the next case shows.

     In Dutta v. Coker, Case No. C056023 (3d Dist. Sept. 28, 2009) (unpublished), plaintiff car passenger was ultimately defensed based on a causation issue in a trial where he claimed damages of $34,000, even though he earlier won a $60,113.47 nonbinding judicial arbitration award that was the subject of a de novo trial request. (Plaintiff had a number of preexisting injuries, so that set up causation hurdles.) About three months after suit was filed by plaintiff, defendant made an offer under section 998 to settle the case for $1,501, with plaintiff's medical expenses being $1,569 at the time of the offer. Plaintiff refused and lost a jury trial. Defendant moved to recover costs under 998, and was awarded $58,821.98 (mainly expert witness fees, with the trial court reducing the cost request by $2,444.50).

     Plaintiff appealed, claiming the offer was unreasonable and not in good faith from his perspective.

Costs: Corrected Judgment Reversed Where Modification Was For Judicial Rather Than Clerical Error

Second District, Division 4 Has a Good Discussion of the Difference Between “Clerical” and “Judicial” Error in Corrected Judgment Context.

     Here is an arcane one, but one that does arise every so often.

     In Lee v. H. Rauvel, Inc., Case No. B205454 (2d Dist., Div. 4 Sept. 25, 2009) (unpublished), the lower court “waffled” on the issue of which side was the prevailing party for purposes of a routine costs award. Original winner (on appeal, the losing party) sought review, arguing that the corrected judgment was infirm because it dealt with judicial rather than clerical error.

     The Court of Appeal agreed that judicial error occurred and that the trial court incorrectly entered a modified judgment on substantive bases.

     No small reversal, because each side sought costs (including prejudgment interest) of between $52,101-$55,031. The opinion is must reading for anyone wanting to know the difference between “judicial” versus “clerical” error in the modified judgment context.

Correction On Past Post: October 9, 2008 Post On Lu v. Grewal Has An Error

Department of Corrections.    

      We do not claim to be infallible, and thank a reader who recently drew our attention to our October 9, 2008 post on Lu v. Grewal. In our synopsis, we erroneously said “Plaintiff was unhappy, appealed, and lost,” whereas it should have said “Defendants were unhappy, appealed, and lost.” We do apologize for the error and have corrected it so that anyone going to it now will pick up on the correct state of facts.

Photo:  Child wearing dunce cap in class. c1906.  Wikipedia.

 

P.S.  We are not the first to have reversed polarities:

"Ha, ha, my ship! thou mightest well be taken now for the sea-chariot of the sun. Ho, ho! all ye nations before my prow, I bring the sun to ye! Yoke on the further billows; hallo! a tandem, I drive the sea!"

But suddenly reined back by some counter thought, he hurried towards the helm, huskily demanding how the ship was heading.

"East-sou-east, sir," said the frightened steersman.

"Thou liest!" smiting him with his clenched fist. "Heading East at this hour in the morning, and the sun astern?"

Upon this every soul was confounded; for the phenomenon just then observed by Ahab had unaccountably escaped every one else; but its very blinding palpableness must have been the cause.

Thrusting his head half-way into the binnacle, Ahab caught one glimpse of the compasses; his uplifted arm slowly fell; for a moment he almost seemed to stagger. Standing behind him Starbuck looked, and lo! the two compasses pointed East, and the Pequod was as infallibly going West.

But ere the first wild alarm could get out abroad among the crew, the old man with a rigid laugh exclaimed, "I have it! It has happened before. Mr. Starbuck, last night's thunder turned our compasses- that's all. Thou hast before now heard of such a thing, I take it."

"Aye; but never before has it happened to me, sir," said the pale mate, gloomily."

 

-- From Moby Dick

 

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Costs: Referee’s Costs Were Awardable In Partnership Damages/Accounting Dispute

 

Fourth District, Division 1 Sustains Award of Referee’s Costs to Prevailing Party.

     In Behne v. Chodur, Case Nos. D052416/D053551 (Sept. 24, 2009) (unpublished), a brother and sister unfortunately got into a partnership damages/accounting donnybrook. An accounting referee was appointed by the court to determine the net proceeds of several real estate projects involved in the overall action. Brother lost, with the lower court eventually awarding sister $38,220 in costs, representing her share of the referee’s fees. Brother, being unhappy, appealed.

     The referee’s fees were found to be a proper item of costs assessed against brother. As a court appointed assistant, the referee’s fees were an item to be borne by the losing party. (DeBlase v. Superior Court, 41 Cal.App.4^th 1279, 1285 (1996).) Beyond this general rule, Code of Civil Procedure section 1033.5(c)(4) allows the court discretion to award costs items not mentioned in the section, a catchall provision that also was a proper basis for including referee’s fees as an item of costs.

Voluntary Dismissal Of Tort Claims: Be Careful—If Contract Clause Allows For Recovery, You May Not Seek Refuge Under Santisas

Second District, Division 1 Affirms Fee Award to Broker Under Broadly Worded CAR Form Agreement.

     Under Santisas v. Goodin, 17 Cal.4^th 599 (1998), a voluntary dismissal will end fee exposure on contract claims. However, there is a hitch (usually is). The dismissal will not necessarily insulate against fee exposure for tort or noncontract claims. That hitch came to bite the losing litigants in the next case, Kymm v. O’Loughlin, Case No. B211512 (2d Dist., Div. 1 Sept. 24, 2009) (unpublished).

Attorney’s Charging Lien: It Has Priority Over Prior Judgment Creditor’s Lien

Second District, Division 7 Upholds Attorney Lien Priority in Unpublished Decision.

     For those of you needing a primer on how potent attorney’s charging liens can be, we refers you to the recent unpublished decision in Johnson v. Jones, Case No. B208858 (2d Dist., Div. 7 Sept. 24, 2009) (unpublished).

     There, a judgment creditor intervened in an action to collect some proceeds to satisfy an outstanding judgment owed by a judgment debtor who himself hired attorneys to collect upon a judgment lien he had against an unrelated party. Judgment creditor did obtain a court order for payment of $72,000, but did not beat out judgment debtor’s attorneys to the tune of another $48,000. The trial court found that the attorney’s charging lien, even though later in time, “trumped” the judgment creditor’s lien.

     This case has a nice discussion of the leading cases on attorney’s charging liens, and concludes public policy favored the priority of an attorney lien—after all, the judgment creditor might not have received anything but for the collection efforts of judgment debtor’s attorneys as against the unrelated party. (Waltrip v. Kimberlin, 164 Cal.App.4^th 517. 525-526 (2008).)

Requests For Admissions: Court Of Appeal Reverses Denial Of RFA Sanctions Where Trial Court Found No Reasonable Basis for Denials But Found No Additional Work Expended

Fifth District Reversed, Finding Mandatory Sanction Was In Order.

     O.K., readers, go to our category “Requests for Admission” for a primer on when fees can be awarded for sanctions when a party fails to admit the truth of RFAs. (Code Civ. Proc., sec. 2033.420(a)-(b).) Now, we have a reversal of a trial court ruling in not allowing RFA sanctions on punitive damage issues in a lawsuit.

     The case arises from Fifth District Court of Appeal and is Hodge v. Guarantee Real Estate, Case No. F056064/F056101 (5^th Dist. Sept. 23, 2009) (unpublished).

     In a purchaser-broker dispute, brokers served RFAs requesting an admission that they did not engage in conduct constituting malice, oppression or fraud for purposes of the punitive damage claims. Plaintiffs denied these RFAs, and brokers were granted a nonsuit during trial that the punitive damage claims were improper. Brokers then moved to recover RFA sanctions, but the trial court denied in unusual fashion. Although finding that the RFA denials were not supported by a reasonable good-faith basis that plaintiffs would prevail on the punitive damage issue, the RFA sanctions were denied because the lower court could not conclude that these denials caused any additional work in the overall defense of the action.

     Brokers appealed, and won—they got a shot to show their time for the RFA denials and obtain an award of sanctions (likely, with a fair amount being attorney’s fees, our forte!).

     The Court of Appeal seemed to be swayed by the reasoning of the trial court itself in oral proceedings. If there was no good faith basis for punitive damages, why weren’t at least some fees allowed? The appellate court had no good answer, and did not regard the facts as classifying this an exceptional case where fees should be denied altogether. So, on remand, plaintiffs can apportion fees and demonstrate what should be awarded as an appropriate RFA sanction.

Discovery Sanctions: California Court Of Appeal Affirms $6,632.50 In Discovery Sanctions Against Party Who Failed To Adequately Answer Special Interrogatories

Published Decision Is Must Reading For All Litigators Engaged in Discovery Disputes.

     We knew that we would enjoy the next decision, because it analogizes discovery disputes to the imagery of Hotspur (Henry Percy)—who is graphically depicted in Shakespeare's Henry IV as being blinded by a combative nature and incapable of informally resolving a disagreement with the King (a trait that ultimately cost him his life). The case is Clement v. Alegre, Case No. A123168 (1^st Dist., Div. 2 Sept. 23, 2009) (certified for publication).

     In Clement, defendant served some special interrogatories seeking to obtain information of plaintiffs' damages, causation, and the existence of a loan commitment. However, plaintiffs objected on the basis that "economic damages" was vague and the interrogatories violated the self-containment rule. Meet and confers were engaged in, but plaintiffs stood their ground (a la Hotspur). A discovery referee was not impressed, ordering further answers and sanctioning plaintiffs in the amount of $6,632.50. Plaintiffs (a la Hotspur) appealed.

     Plaintiffs (a la Hotspur) lost the appellate battle, too.

     Clement is must reading on several points:

     · Misuse of the discovery need not be willful in order to justify monetary sanctions—it must be without substantial justification or evasive in nature;

     · The self-containment rule is not so ironclad that it should be applied in the absence of its rationale to prevent exceeding the numerical limit for special interrogatories;

     · A compound objection should likely be sustained only where more than a single subject is covered by an interrogatory;

     · The meet and confer process is just that—both parties must make a serious effort to negotiate and reach an informal resolution, with mere argument and bickering not being tantamount to a good faith attempt at informal resolution.

     BLOG FAVORITE QUOTE—"More than 10 years ago, Townsend v. Superior Court (1998) 61 Cal.App.4^th 1431 lamented the all too often interjection of 'ego and emotions of counsel and clients' into discovery disputes, warning that '[l]ike Hotspur on the field of battle, counsel can become blinded by the combative nature of the proceeding and be rendered incapable of informally resolving a disagreement.' (Id. at p. 1436.)"

     BLOG UNDERVIEW—Los Angeles County Superior Court Judge Terry Green actually requires attorneys to personally meet and confer when discovery disputes arise. He suggests that much gets done over a cup of coffee or a glass of Merlot. We tend to agree.

In The News . . . . Final Tab Is In On Great Park Dispute—Over $200,000 In Fees Expended

The Orange County Register Obtains Final Numbers from City of Irvine.

     We have reported in past posts—see our July 1 and August 22, 2009 posts--about Great Park board members Christina Shea and Steven Choi’s lawsuit to obtain documents about the search for a Great Park CEO.

     The final attorney’s fees tab is in! Sean Emery, in an article entitled “The cost of secrecy,” published in the September 23, 2009 The Orange County Register, reports that the City of Irvine spent $126,472 defending the lawsuit and then paid an additional $75,000 to the attorneys for Ms. Shea and Mr. Choi. You can do the math—over $200,000 for this exercise in secrecy that drew a fairly strident opinion from the Santa Ana Court of Appeal in reversing a lower court who found the Board members did not prevail in their lawsuit.

SLAPP: Appellate Fees For Sustaining Lower Court’s SLAPP Ruling Are Recoverable

 

First District, Division 5 So Holds in Unpublished Decision.

     Plaintiff had his malicious prosecution action stricken through a SLAPP motion, a ruling that was appealed. After obtaining a dismissal of the appeal because it was untimely filed, defendants filed a motion to obtain appellate fees for successfully defending the SLAPP ruling on appeal. (Earlier, the defense motion for trial court SLAPP fees was denied, because it was untimely filed.) The trial court awarded $48,000 in attorney’s fees out of a requested $52,669 to defendants. Plaintiff appealed on numerous grounds, but primarily contended that defendants were not entitled to appellate fees for upholding the SLAPP ruling.

     Not so, said the appellate panel in Laiwala v. Hyundai Electronics America, Case No. A123514 (1^st Dist., Div. 5 Sept. 22, 2009) (unpublished). “For over a decade, California courts have consistently held that the fee-shifting provision of section 425.16, subdivision (c) applies to attorney fees incurred on appeal by a prevailing defendant-respondent.” (Slip Opn., p. 5, citing Paulus v. Bob Lynch Ford, Inc., 139 Cal.App.4^th 659, 686 (2006); Wilkerson v. Sullivan, 99 Cal.App.4^th 443, 448 (2002).) The Court of Appeal followed this line of authority allowing recovery of SLAPP appellate fees.

     The equities also figured into the result here. The appellate panel did not feel plaintiff was a victim; after all, he had dodged a bullet when defendants failed to timely seek SLAPP trial fees and invited his own problems by failing to timely appeal the SLAPP dismissal order.

Family Law: “Litigating Just to Litigate” May Influence Needs-Based Denial of Fee Request

 

Sixth District Looks At All the Relevant Circumstances Under Family Code Section 2030.

     Although we might think that this next lesson would be self evident, “litigating just to litigate” may get you into trouble. It also may have a spillover effect as far as influencing trial and appellate courts’ thought processes when it comes to evaluating fee requests. In the next case, a fee denial was based in part upon the litigant’s frivolous litigation, which showed there was no reasonable need of a fee award to level the playing field to compensate wife for perceived meritless conduct.

     In Marriage of Loumena, Case No. H033141 (6^th Dist. Sept. 22, 2009) (unpublished), wife was miffed when the family law judge denied her request for a “needs” based fee award under Family Code section 2030. (She probably should have quit long ago—earlier, she was ordered to pay husband $12,382.64 as reimbursement and ordered to pay husband over $100,000 in fees and costs as sanctions under Family Code section 271.)

     Despite the fact husband only earned about $51,000 a year (not the “well over six figures” wife claimed), wife did appeal notwithstanding the lower court had denied the fee request by stating “you can’t just litigate for litigation sake.”

     Wife’s appeal was unsuccessful. “While [wife] may have fewer financial resources than [husband], the trial could have concluded that her continuous pursuit of frivolous litigation against [husband] established that she did not have a reasonable need for an award of fees and costs.” (Slip Opn., at p. 3.)

Special Fee Shifting Statute and Fee Clause Interpretation: Singapore Law Governs Non-Statutory Issues

 

Ninth Circuit Reverses Denial of Fees Award, Remanding for A New Look in COGSA, Bill of Lading Case.

     So what happens when you have a seemingly statutory choice-of-law clause (that means no attorney’s fees) and a contractual clause (that may mean attorney’s fees) in the same case? Well, if you are the litigant arguing for a fee award—argue that the contractual clause governs. That is what the litigant argued in the next case did and—wonders of wonders—it obtained a reversal of a fee denial on appeal.

     The case is APL Co. Pte. Ltd. v. UK Aerosols Ltd., Case No. 07-16739 (9^th Cir. Sept. 21, 2009) (for publication), which involved a bill of lading governed by Singapore law and the operation of the Carriage of Goods by Sea Act (COGSA). The district judge essentially held that COGSA was the governing choice-of-law provision in a bill of lading that “preempted” a fees clause applying Singapore law (which adopted the English Rule that the prevailing party wins). Federal law generally does not permit the prevailing party in an admiralty case to recovery attorney’s fees. (B.P.N. Am. Trading, Inc. v. Vessel Panamax Nova, 784 F.2d 975, 977 (9^th Cir. 1986).) However, notwithstanding this rule, admiralty courts will generally give effect to a contractual agreement that holds otherwise. (Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1297-97 (9^th Cir. 1997).) Because the contractual bill of lading clause specified Singapore law (winner obtains fees) and Singapore law was the proper choice of law over COGSA, the matter had to be reversed and remanded for a calculation of fees due to the prevailing party.

In the News: Kopits Ordered To Pay $47,157.50 In Attorney’s Fees To City Of Yorba Linda

 

Horse Trail Blocking Incident Draws Criminal Sentence As Well As Fee Assessment.

     Yorba Linda couple Todd and Deborah Kopit were in the local Orange County news after being found guilty of blocking a horse trail behind their home. The Kopits had claimed that the wooden gates were necessary to protect their property. The jury apparently rejected this defense.

     Recently, Orange County Superior Court Judge Daniel T. Brice imposed a criminal sanction on them (including 90 days jail time for Mr. Kopit that could be suspended if he does manual work for Caltrans), fined them the maximum amount of $1,000, and ordered the couple to pay $47,157.50 in attorney’s fees to the City as restitution for expenses incurred in prosecuting the case. Jamie Raymond, a City attorney, was quoted as saying that the fees ordered to be paid were about half the amount of what the Kopits’ trial cost the city.

     For more on this story and a photograph of the pertinent horse trail, see Jessica Terrell’s Yorba-gate story published in the September 18, 2009 online issue of The Orange County Register.

 

Consumer Statutes And Requests For Admissions: Court Of Appeal Denies Unfair Competition Defendants' Request For Fees Under Section 17200 Or Under RFA Sanctions Statute

No Basis For Fees Based On Defensed Claims; No Abuse of Discretion in Denying RFA Sanctions.

      In Chichi v. Ennen, Case No. D053410 (4^th Dist., Div. 1 Sept. 18, 2009) (unpublished), plaintiffs brought a class action under California's unfair competition statute based on violations of several other California statutes. After plaintiffs rested their case-in-chief at a bench trial, the trial court decertified the class and granted an oral motion for judgment against plaintiffs.

     Defendants then moved to recover attorney's fees based on two grounds: (1) a contractual attorney's fees clause in the contract involved in the overall tapestry of the UCL claim; and (2) the RFA statute that allows a party to recoup fees for proving the truth of certain requests that were denied by plaintiffs.

     Defendants did not succeed on appeal.

     As to the first ground, the Court of Appeal found no basis to award fees to defendants under the UCL. "The unfair competition law does not provide for attorney fees. Although a prevailing plaintiff on an unfair competition claim may seek attorney fees as a private attorney general under Code of Civil Procedure section 1021.5, a prevailing party has no such right." (Slip Opn., at p. 4, citing Walker v. Countrywide Home Loans, Inc., 98 Cal.App.4^th 1158, 1179-1180 (2002).)

     Defendants then tried to argue there was a contractual basis for fee recovery under Civil Code section 1717. Wrong again, said the appellate panel. The UCL claim did not allege any contract was breached and did not seek enforcement of the contract; so, only a UCL claim was involved that conferred no basis for a fee award.

     Defendants then defaulted to Code of Civil Procedure section 2033.420(b), which allows a court to award fees as a cost of proof for failing to admit an RFA under specified circumstances. (See our category "Requests for Admissions" to explore this statute more fully.) The problem with this argument is that any challenge to a lower court ruling is reviewed under a deferential abuse of discretion standard. (Laabs v. City of Victorville, 163 Cal.App.4^th 1242, 1275-1276 (2008).) In this instance, nothing in the record indicated that the plaintiffs lacked a reasonable basis for contesting the matters referred to in the RFA. Given this determination, the refusal to award fees was sustained on appeal.

Bankruptcy: Ninth Circuit BAP Issues An Illuminating Opinion On Block Billing And Travel Time Issues

 

Although Germane In Bankruptcy Context, Case May Be Helpful in Non-Bankruptcy Cases.

     You readers of our blog are a constant source of inspiration. Today, we thank attorney Andrew L. Fagan of Santa Rosa for alerting us to a recent unpublished Ninth Circuit BAP decision that has interesting discussions of block billing and reimbursement of attorney travel time.

     To some extent, this next decision is of most interest to debtor/trustee/creditor committee bankruptcy practitioners, who must have their fees evaluated and approved by bankruptcy courts (after complying with stringent U.S. Trustee Office guidelines). However, there are some important nuggets in the case which may have far broader significance in non-bankruptcy contexts.

     In re Shari L. Thomas, BAP No. CC-08-1307-HMoPa (BAP 9^th Cir. Jul. 6, 2009) (not for publication) had this to say on these two issues:

     · A bankruptcy court has discretion to reduce, rather than disallow, compensation based on fee applications where a portion or all of the fees are based on "lumped entries" (aka block billing)—Mendez v. County of San Bernardino, 540 F.2d 1109, 1129 (9^th Cir. 2008) (reduce hours due to block billing, but not make an across-the-board reduction or rejection of all hours); Darling Int'l., Inc. v. Baywood Partners, Inc., 2007 WL 4532233 at * 9 (N.D. Cal. 2007) (as a percentage penalty for lumping, most courts make an adjustment ranging from 5% to 30%, consistent with a California State Bar's committee's finding that block billing may increase time by 10% to 30%);

     · The amount of total "lumped" fees does not dictate the percentage of reduction, with the Thomas appellate panel sustaining 10% reduction as a remedy for lumped entries—see also Gundlach v. N.A.A.C.P., 2005 WL 2012738 at *4 (M.D.Fla. 2005) (30% reduction where all fees based on lumped entries); Spalding Lab., Inc. v. Ariz. Biological Control, Inc., 2008 WL 2227501 at *4 (C.D.Cal. 2008) (15% reduction where all fees based on lumped entries); Ambriz v. Arrow Fin. Serv., LLC, 2008 WL 2095617 at *4 (C.D.Cal. 2008) (20% reduction where attorneys respectively lumped 17% and 9% of time as lumped entries); In re Recycling Indus., Inc., 243 B.R. 396, 407 (Bankr. D.Colo. 2000) (5% reduction when 10% of fees based on lumped billing entries).

     · There is no consensus among courts on what should be allowed for professional's travel time under the bankruptcy compensation statute. Although some districts have general orders and established policies (examples: 50% of ordinary rate applies to travel time up to 100% for lost opportunities, depending on district), bankruptcy courts have wide discretion in this area. A dissenting bankruptcy judge in Thomas disagreed with the majority's full approval of a lawyer's travel time request. See also In re Babcock & Wilson Co., 526 F.3d 824, 828-829 (5^th Cir. 2008) (travel time compensated at 50% of ordinary rate); In re McKeeman, 236 B.R. 667 (BAP 8^th Cir. 1999) (same).

In the News . . . U.S. District Judge Selna Grants Qualified Immunity To James C. Corbett In Farnan First Amendment Case

 

Ruling Immunizes Dr. Corbett and Brings the Matter to a Close.

     Plaintiff/student C.F., by and through his parents Bill and Teresa Farnan, filed a suit for violation of C.F.’s First Amendment rights by the Capistrano United School District and Dr. James C. Corbett arising out of Dr. Corbett’s alleged hostile religious remarks in an Advanced Placement European History class. This case has been in the news frequently in Orange County in various forms of media.

     There had been a fear that Dr. Corbett might face substantial fee exposure to plaintiff’s attorneys after U.S. District Judge James V. Selna ruled that there was merit to Plaintiff’s claim based on one statement made by Dr. Corbett. However, that fear did not materialize after a September 15, 2009 ruling on District Judge Selna.

     He ruled that Dr. Corbett had qualified immunity. Here is how he eloquently put it in his order although clearly reminding everyone that a First Amendment violation had been previously found:

     “. . . today’s application of the doctrine of qualified immunity recognizes that public officials operate in an environment not shared by their colleagues in the private sector. Public officials have no choice about interacting with the public; that is their job. Unlike interactions in the private sector, every interaction brings into play potential Constitutional rights and the possibility of infringement of those rights. Perhaps this is most clearly seen in the context of law enforcement where advisements of Constitutional rights, search and seizure issues, and the use of lawful force are a part of a police officer’s daily responsibilities. But the same is true of a teacher presenting a challenging subject such as Advanced Placement European History which cannot be fairly treated without discussing religion, just as Corbett was doing during the fall of 2007. Public officials must be able to do their jobs without fear that every misstep, however slight, will subject them to liability and the paralysis which goes with such a fear. Thus, the doctrine of qualified immunity looks to whether there was a clearly established right in issue. Here, the Court has found that there was not, and thus Corbett is shielded from liability—not because he did not violate the Constitution, but because of the balance which must be struck to allow public officials to perform their duties. The law as it existed in the fall of 2007 did not make clear that a single statement in an area of the law which lacks precision could violate the Constitution. The decision here on the merits advances the clarity of Farnan’s right to be free of anti-religious comments, but the extent of the advance and the results of future applications of the doctrine of qualified immunity in this area are for another day and another court.”

Fee Substantiation: Improper Authentication of Prior Counsel Fee Bills Costs Prevailing Party $141,283.75 In Ultimate Fee Recoupment

 

Demonstrative Evidence and Computer Related Expenses Were Properly Allowed As Routine Costs.

     The next case is one that will remind practicing litigators to make sure they properly authenticate fee submissions in support of attorney’s fees request. The decision also has a nice discussion of some routine cost items that are recoverable in this age of demonstrative evidence (including computer assistive devices).

     Gullwing International Motors, Ltd. v. Ostermeier, Case No. B206441 (2d Dist., Div. 2 Sept. 17, 2009) (unpublished) had its inception when plaintiff buyer bought a Mercedes Benz Gullwing building replica business from defendant seller based on seller’s exact words to buyer: “Trust me. This is a gold mine.” As reported in the decision and apparently accepted by a jury, the business was apparently no gold mine. The jury awarded plaintiff $17.178 million in compensatory damages and $1 million in punitive damages in buyer’s subsequent fraud lawsuit. Later in the litigation, the trial court awarded plaintiff $34,742.66 of requested $60,742.89 in routine costs, as well as $457,615.25 in attorney’s fees.  [Chromolithograph:  Miner in the Klondike  1890-1900.  Library of Congress Collection].

     Plaintiff appealed.

Civil Code Section 1717 And Assignees: Second District Publishes The Vons Companies, Inc. v. Parks

 

Case Is Reviewed On Our August 18, 2009 Post.

     For those of you who might represent the assignee of documents with a fees clause, we reviewed an interesting decision from the Second District, Division 8—The Vons Companies, Inc. v. Lyle Parks, Jr., Inc.—in our August 18, 2009 post dealing with the interaction between Civil Code section 1717 and assignment principles.

     It was unpublished at the time, but the Second District decided to make it citable as precedent via a September 17, 2009 publication order. So, go to our August 17 post for a complete review of the newly published decision.

In The News: Hulk Hogan Likely To Sue Attorneys For Fee Billings In His Defense Of Personal Injury Case Arising Out Of Son's Street Racing Fallout

Superhero Confronts Attorney's Fees Issue.

     It is not just normal folks that sometimes have issues with attorney's fees . . . celebrities are not above the fray.

     Hulk Hogan, whose real name is Terry Bollea, has claimed to have paid more than $1.5 million to a law firm defending him in a personal injury action arising out of his son's street racing activities in downtown Clearwater, which resulted in injuries to son's friend who was a passenger in the car at the time. Lawsuits proliferated, but Mr. Hogan claims that he learned way too late that his insurance company had offered to provide insurer-paid counsel. According to a recent newspaper article, the attorneys that he had paid never informed Mr. Hogan about the insurance company's offer. Now, a legal malpractice action has been filed by Mr. Hogan against the attorneys, in a case that we will try to follow in the aftermath of this attorney's fees donnybrook. Stay tuned, although Mr. Hogan's adversaries in the case (his former attorneys) have denied the claims as being baseless in nature.

     For more details on this story, see Curtis Krueger's September 14, 2009 story "Hogan sues lawyers over fees" in the St. Petersburg Times, available for reading at tampabay.com.

CCP 998 Offers: Court Of Appeal Sustains $163,760 Cost Award Based On Rejected 998 Offer By Plaintiff

 

Second District, Division 5 Finds Offer Was Made In Good Faith Under Abuse of Discretion Standard.

     Code of Civil Procedure section 998 offers can be tough and can completely shift the leverage in a particular case. Although the offers must be made in good faith, they must be evaluated carefully. The next one was low but found to be in good faith, much to the chagrin of the losing plaintiff who did not accept the offer.

     In Javaheri v. Aum, L.P., Case No. B206898 (2d Dist., Div. 5 Sept. 15, 2009) (unpublished), plaintiff sued defendant neighbors for claimed damage to plaintiff’s building during defendants’ excavation of a nearby condominium project. Plaintiff lost after a jury trial, with the trial court awarding defendants $163,760 in costs (all of the requested amount, including substantial expert witness fees). The costs award was based on plaintiff’s rejection of a 998 offer by defendants to end the case in return for a $1,001 payment to plaintiff.

     On appeal, the costs order was affirmed. The standard of review was determinative, because a “good faith” determination in this context is a discretionary call for the lower court and reviewed under the abuse of discretion standard. (Arno v. Helinet Corp., 130 Cal.App.4^th 1019, 1025 (2005).) Nothing in the record “jumped out” at the appellate panel to lead it to disturb the exercise of discretion below, even though the 998 offer was small and made early in the litigation (before expert depositions were taken). The defendant had apparently evaluated the case properly, determining no damages were appropriate (an evaluation shared by the jury). The Court of Appeal was not about to use “hindsight” to find the offer other than in good faith.

Bankruptcy: Pre-Confirmation Fee Requests Governed By Federal Bankruptcy Law; Post-Confirmation Requests Governed By State Law

 

Ninth Circuit So Holds in Recent Published Decision.

     In In the Matter of Hoopai, Case No. 07-15868 (9^th Cir. Sept. 14, 2009) (for publication), the Ninth Circuit decided two things: (1) a creditor’s pre-confirmation request for an award of fees as an oversecured creditor in a Chapter 13 case was governed by 11 U.S.C. section 506(b), rather than state law; and (2) debtor’s post-confirmation request for an award of fees was governed under state (Hawaii) law. As a result, an $83,542.97 award to fee to creditor and a denial of fees to debtor were both vacated, to return to the bankruptcy court for redetermination.

Prevailing Party and Nonstatutory Costs: Trial Court Award Of $643,606.76 In Fees Is Affirmed Even Though Defendant Eventually Lost Summary Judgment Trial and Appellate Segments

Court of Appeal Does Strike Nonstatutory Costs Award, Following Ripley Over Bussey.

     In Gaggero v. Yura, Case No. B203780 (2d Dist., Div. 5 Sept. 14, 2009) (unpublished), defendant won a purchase agreement dispute with a contractual fees clause after the trial court found that a condition precedent—CC&Rs—was not agreed on between both sides. (Seller did not want to allow any dogs; co-contributor Mike and his Labrador Riffle say “boo.”) Defendants then moved for an award of $63,829.18 in costs (including both statutory and nonstatutory costs) and $645,492.50 in fees. The trial court awarded almost the full request to defendant--$63,806.18 in costs and $643,606.76 in fees. Plaintiff appealed.

     With respect to costs, the appellate panel did modify the judgment to delete nonstatutory costs, preferring to follow Ripley v. Pappadopoulos, 23 Cal.App.4^th 1616, 1624-1625 (1994) (disallowing nonstatutory costs) over Bussey v. Affleck, 225 Cal.App.3d 1162, 1167 (1990) (allowing nonstatutory costs award). (BLOG REVIEW—Ripley is the majority view on this issue, as we have discussed on our previous June 5, 2008 general subject matter post as well as June 4, 2008 post on Richlin Security and November 5, 2008 post on Ekstrom. See discussion of this split in Carwash of America-PO v. Windswept Ventures No. 1, 97 Cal.App.4^th 540, 544 (2002).) So, add the Second District, Division 5 to the list of courts that endorse Ripley.

     That brought up the propriety of the substantial fee award. That issue came down fully in defendant’s favor. Prevailing parties are entitled to an award of fees, in the trial court’s discretion, for unsuccessful activities. (City of Sacramento v. Drew, 207 Cal.App.3d 1287, 1303 (1989).) In this case, defendant did obtain fees rightfully for unsuccessfully attempting to uphold a lower court summary judgment victory, even though the appellate court reversed the grant in an earlier opinion. “Having obtained a summary judgment, it was reasonable for the trial court to conclude that defendant was justified in attempting to uphold that judgment on appeal” (Slip Opn., at p. 29.)

     BLOG FAVORITE QUOTE—“The process of litigation is often more a matter of flail than flair; if the criteria of [Code of Civil Procedure] section 1021.5 are met the prevailing flailer is entitled to an award of attorney fees.” City of Sacramento, supra, 207 Cal.App.3d at 1303.

Civil Rights: Court Of Appeal Affirms Lower Court’s Award of $6,659.15 To Plaintiff Who Had Limited Success And Recovered Only $5,000 In Disability Case

Second District, Division 6 Rejects Plaintiff’s Request for Award of $114,895 in Fees and $27,441.35 in Costs.

     Although the courts will award appropriate attorney’s fees to prevailing plaintiffs in civil rights disability cases, they will also discount for limited success and overinflated claims of complexity in litigation of the case.

     Molski v. Evergreen Dynasty Corp., Case No. B208988 (2d Dist., Div. 6 Sept. 14, 2009) (unpublished) illustrates this result in a recent “real time” case just decided upon appeal.

     There, disabled plaintiff sued for multiple violations under civil rights and other state statutes, many of which carried mandatory fee-shifting provisions in favor of prevailing plaintiffs. However, plaintiff only recovered mandatory minimum awards totaling $5,000 and lost several claims (including claims with punitive damage exposure) against the main company defendant (respondent on appeal). Also, another defendant settled for $14,950 before trial, with no apportionment between damages and attorney’s fees. Plaintiff failed to serve a costs memorandum, but did move to recoup $114,895.00 in fees and $27,441.35 in routine costs.

     The trial court awarded $6,659.15 in fees, using a reasonable lodestar ($66,591.50) but then reducing it by a tenth based on lack of difficulty, limited success and skill displayed, and the absence any evidence showing that plaintiff’s counsel had to forego other work. Plaintiff (or likely his attorney), not being a “happy camper,” appealed.

E-Discovery: Sanctions Result In 35% of Decisions Addressing These Issues

Mr. Segal So Reports in Recent California Lawyer Article.

     We would like to thank Mr. Perry L. Segal, an IT executive turned e-discovery attorney and consultant, for an interesting statistic he provided in his article “E-Discovery: New Rules, Big Headaches,” published in the September 2009 California Lawyer.

     Mr. Segal reports that it’s estimated that out of all case law that addresses e-discovery issues, more than 35% result in sanctions.

     Based on this statistic, Mr. Segal suggests that practitioners tackle e-discovery with the “W5+H” approach:

• Who should be involved?
• What data are you looking for?
• When are the due dates?
• Where is the data?
• Why is it relevant?
• And how will you comply?

California Appellate Courts: A New Survey Suggests Reversals Are “On The Rise” In Intermediate Courts of Appeal

Professor Uelmen’s Latest Survey Shows A Rise in Reversals.

     In the September 2009 issue of the California Lawyer, Professor Gerald F. Uelmen talks about the recent trends in California Supreme Court decision making, doing so in an article wickedly entitled “Too Much Togetherness?” Beyond this main topic, Professor Uelmen also has an interesting survey for the 2004-2009 period concerning affirmance rates for both the California Supreme Court and the various California Courts of Appeal. We thought we would share some of the findings with you. However, he basically concludes that there is a significant variance in affirmance rates among the various intermediate courts, while the overall affirmance rate by the Supreme Court has held somewhat steady.

     The overall affirmance rate for all cases during 2004-2009 for the California Supreme Court was 41.5%, a slight decline from the 45.9% rate for the earlier 1996-2004 survey period. (Professor Uelman observed that there was little difference between the affirmance rates for civil and criminal cases.)

     However, the real variance occurred among the District Courts of Appeal (in appellate parlance, the DCAs). We will keep to an examination of affirmance rates in civil cases.

• The Second District, Division 1 had the lowest overall affirmance rate, clocking in at 17% for 2004-2009 (compared to a 40% rate for 1996-2004).
• The honor for highest affirmance rate in the Second District went to Division 8, which had a 71% rate for 2004-2009 (which had no prior comparison rate because it was created in 2000).
• Overall, however, the winner of the highest affirmance rate went to our local Fourth District, Division 3 Court of Appeal, which had a 73% rate during 2004-2009 (as compared to a 22% rate in 1996-2004). Professor Uelman attributed this to significant turnover in the Santa Ana court between the two periods, positing that the new lineup has a closer affinity with the “Ron George” Supreme Court.

     Also, the Sixth District had the next lowest affirmance rate of 18% for 2004-2009 (as compared to a 38% rate for 1996-2004). After the Fourth District, Division 3 and the Second District, Division 8, the third highest affirmance rate went to the First District, Division 5, which had a 64% affirmance rate during 2004-2009 (up from a 42% rate during 1996-2004).

Family Law Awards: Mother Had To Pay Court Appointed Attorney To Represent Minor Child

Parent's Ability to Pay Does Not Need to be Recalculated Every Time Minor's Counsel Submits a Fee Bill.

     Courts can issue orders appointing counsel to represent the child under Family Code section 3150 in dissolution actions. The court has wide discretion to make the parents, rather than the County, responsible for the counsel fees. (Fam. Code, § 3153(a).) In the next case, mother lost an appeal of a lower court decision ordering her to pay over $21,000 in fees for minor's counsel.

     In Marriage of Heierle and Assawasuksant, Case No. A121688 (1^st Dist., Div. 4 Sept. 10, 2009) (unpublished), the lower court ordered parents to split the fees of an attorney appointed by the court to represent a minor (even though initially the County was paying the tab). The family judge then ordered mother to pay over $21,000 in fees (her share). She was unhappy, and appealed.

Special Fee Shifting Statute: Split Among Federal Circuit Courts On Whether EAJA Fee Awards Are Payable To Claimant Rather Than Attorney, Allowing Offsets By Government Entities

Fourth Circuit Concludes Fees Are Payable to Claimant.

     Here is an interesting issue that has drawn a split among federal courts of appeals: whether attorney’s fees payable under the Equal Access to Justice Act, 28 U.S.C. section 2812 (EAJA), in Social Security Act benefit cases go to the claimant or the attorney. The importance of the answer to this issue may have a wide-ranging impact on the claimant--if the fees go to the claimant, the government can take the position they are subject to administrative offset for the collection of other debts (such as child support or state income taxes). See 31 U.S.C. section 3716.

     The Fourth Circuit, in Stephens v. Astrue, 565 F.3d 131 (4^th Cir. 2009), decided that the plain meaning of section 2412(d)(1)(A) of the EAJA shows that fees go to the “prevailing party,” namely the claimant. It observed that, in other areas, Congress has directed payments of fee awards to attorneys, when this result was desired. (See SSA section 206(b).) A contrary award to an attorney by a magistrate judge was vacated.

     Stephens is in conflict with decisions to the contrary in the Sixth, Eighth, and Eleventh Circuits, which hold that attorney’s fees are payable directly to the attorney.

     This issue appears one that may be reviewed and resolved by the U.S. Supreme Court at some point in time, given that the result in Stephens might provide a disincentive for attorneys to take on SSA benefit cases if fees go to the claimant and could be offset by other debts in entirety.

In The News: Settlements, Settlements, Settlements Abound … With Large Attorney’s Fees Being Sought or Paid

Also, Co-Contributor Marc Wins 3-Day Jury Trial.

U.S. Navy Sonar Whale Settlement.

     In our September 16, 2008 post, we reported on the Ninth Circuit’s decision in National Resources Defense Council, Inc. (NRDC) v. Winter, where Irell & Manella was awarded $437,584.24 in fees in the dispute to protect whales from U.S. Navy sonar use off the California coast. The case worked its way to the Ninth Circuit, where Irell won another battle in its efforts to obtain fees for its pro bono work on the case. Now, the Blawter (the Los Angeles Daily Journal’s blog) has reported that the Navy has agreed to pay Irell & Manella $1.1 million in attorney’s fees in an approval request pending before U.S. District Judge Florence Marie Cooper.

Neil Harvey Will Get Paid $1.45 Million from City of Newport Beach.

     In our May 18, 2009 and June 16, 2009 posts, we discussed Newport Beach police sergeant Neil Harvey’s win over the City of Newport Beach in a gay slurs case. Mr. Harvey won about $2 million after a jury trial and postjudgment proceedings, $706,755 of the amount being attorney’s fees recoupment. Now, the City’s insurer have agreed to pay $1.45 million to settle the matter, an amount apparently accepted by Mr. Harvey. For more details, see Jeff Overley’s story “Sergeant to get $1.45 million” in the September 11, 2009 issue of The Orange County Register.

IPO Securities Litigation Settlement--$195 Million in Fees and $50 Million in Expenses Being Sought.

     Lawyers representing plaintiff investors in the IPO Securities Litigation will be requesting $195 million in attorney’s fees and $50 million in expenses as part of a settlement package that will be the subject of an approval hearing on September 10, 2009 before U.S. District Judge Shira Scheindlin of the Southern District of New York federal court. Because the case settled for $586 million, plaintiffs’ lawyers are seeking one-third of that amount, plus expenses. (Judge Scheindlin is well known for her excellent opinions on issues relating to spoliation in the electronic discovery area.)  See Reuters report.

Wal-Mart Settles Meal/Rest Break Class Action in Alameda County Superior Court.

     As reported by Kate Moser in a Legal Pad post on September 11, 2009, Wal-Mart has agreed to settle an Alameda County Superior Court class action involving claimed denials of meal/rest breaks for certain employees. Wal-Mart agreed to a $77 million-$152 million settlement, less than the $172 million awarded by a jury to the class in 2005. Fred Furth, one of the lead California attorneys on the case, indicated he would seek more than $50 million in attorney’s fees (first filed in 2001) and stating he invested millions in the case. It will be up the trial judge to decide the fees that will be awarded under the settlement.

Co-Contributor Marc Wins Jury Trial.

     Co-contributor Mike sends hearty congratulations to co-contributor Marc. He recently won a 3-day jury trial for three defendants in a case tried in front of Orange County Superior Court Judge Derek Hunt. Way to go Marc!

Civil Code Section 1717 Apportionment: Trial Court Did Not Err In Failing To Apportion Fees Where Conjoined Claims Cannot Be Separate For Fee Recovery Purposes

Second District, Division 4 So Rules in Unpublished Decision.

     Apportionment of attorney’s fees, as between covered and uncovered claims, is a discretionary call, as the next decision demonstrates.

     Hur v. Lee, Case No. B210502 c/w BC361921 (2d Dist., Div. 4 Sept. 9, 2009) (unpublished) involved a sushi restaurant seller and his brokers, who suffered an adverse bench trial verdict for fraud in the sale of the restaurant to plaintiff buyers. The court awarded separate compensatory awards of $505,000 and $170.545.88 as well as $100,000 in punitive damages against seller and his brokers. The trial court also awarded attorney’s fees to plaintiffs, as against seller, in the amount of $206,025 based on a fees clause in the sales agreement between seller and buyers. Seller and brokers appealed.

Corporate Dissolution: Voluntary Dissolution Action, With Only A Buy-Sell Agreement Containing a Fees Clause In the Background, Did Not Entitle Petitioning Shareholder To Fees

Sixth District Affirms Fee Denial by Lower Court.

     As we have stated before, the first step in seeking fee recovery in California state courts is to find a firm fee “entitlement anchor,” either a contract or statute conferring the ability for a litigant to recoup attorney’s fees. In the next case, there was a buy-sell agreement, but it was not really involved in the corporate voluntary dissolution action brought by one of the shareholders. The lesson: no fees basis, no fees.

     In Carpentier v. Mangar, Case No. H032731 (6^th Dist. Sept. 9, 2009) (unpublished), one of the shareholders brought a voluntary dissolution petition in the name of the company, and the other shareholder consented to a decree winding up the corporation. Petitioning shareholder was also ordered to reimburse certain sums to the corporation, and a corporate dissolution decree was entered also. Petitioning shareholder then moved for an award of $148,906.50 in attorney’s fees, citing Civil Code section 1717, Code of Civil Procedure section 1021, and Corporations Code section 1904. The lower court denied the motion, and petitioning shareholder appealed.

Ethics And Settlement Involving Fee Waivers: No Ethical Ramifications From Recommending Fee Waiver Settlements

State Bar’s Standing Committee Issues Formal Opinion Confirming Propriety of these Settlements.

     Formal Opinion No. 2009-176 of the State Bar’s Standing Committee on Professional Responsibility and Conduct has concluded that (a) a lawyer does not violate any ethical obligation by recommending or conveying a fee-waiver settlement offer in a given case, and (2) a lawyer does not violate any ethical obligation by recommending or conveying fee-waiver settlement offers in cases generally. However, a plaintiff’s lawyer must inform the client of a fee-waiver settlement offer and consummate the settlement in accordance with the client’s desires even if it reduces the likelihood of recovering some or all of his/her fees.

     We would like to thank Ellen R. Peck, a former State Bar Court judge and sole practitioner in Escondido, for making us aware of this opinion in her article “New State Bar Reporting Requirements,” published in the September 2009 issue of the California State Bar Journal. Ms. Peck also discusses new rules on conflicts of interest, Client Security Fund, Interest on Lawyer Trust Account, and e-mail address requirements for all members of the State Bar. (Remember: By February 1, 2010, all members must create an online profile through the bar’s secure membership system, which must include a valid e-mail address.)

Federal Question Cases: Local Rules On Diversity Cases Cannot Dictate Fee Award

Ninth Circuit So Holds in Alaska Case.

     Although we generally limit ourselves to California cases, we do a short report on Disability Law Center of Alaska, Inc. v. Anchorage School Dist., Case No. 08-35057 (9^th Cir. Sept. 9, 2009) (for publication) because of its potential importance in future California cases.

     There, plaintiff—an Alaskan designated agency for the disabled individuals—sought to enjoin a school district about contact information for students’ guardians or legal representatives. The injunctive request was firmly based in federal statutes. Plaintiff lost, with the district court awarding attorney’s fees to the school district based on an Alaskan civil procedure rule.

     Plaintiff appealed the fee award—and won.

     Federal law governs a pure federal question case. Because no state law issue was raised, it was error to award fees based on a rule that applied to diversity cases or federal question cases with supplemental jurisdiction over state-law claims.

Homeowners Associations: Fourth District, Division 3 Affirms Fee Awards Totaling $188,000 To The Chagrin Of Losing Homeowner

Presiding Justice Sills Sustains Fee Awards on Behalf of 3-0 Panel.

     If one is prone to read lots of appellate opinions (as we are), distinctive styles come through by various appellate justices authoring the cases assigned to them. That happens to be the case in the next decision we review—Presiding Justice Sills, the author, has been noted for his distinctive style by Presiding Justice Perluss of the Second District, Division 7 in Marriage of Silverman (an unpublished decision we did a recent post on). This one, however, involves a homeowner association versus homeowner, with the homeowner coming out on the losing end of the fee battle.

     Nellie Gail Ranch Owners Association v. Colombo, Case No. G040957 (4^th Dist., Div. 3 Sept. 9, 2009) (unpublished) involved two attorney's fees awards totaling about $188,000 for trial and previous appellate work in a case where a homeowners association prevailed against a homeowner. HOA obtained an injunction contemplating that it could enter homeowner's property and demolish half-completed structures because they had not been constructed within a specified time period as required under the CC&Rs. (There was a safety valve section of the injunction that allowed homeowner more time, a safety valve period that got extended because of "some confusion" fessed up to by the appellate court in its prior opinion when the dispute was ongoing.) Homeowner was most unhappy, and appealed the two fee orders.

Family Law: Second District, Division 7 Affirms $30,000 “Needs” Fees Award To Wife

Panel Quotes From Fourth District, Division 3 Colleagues in the Process.

     Who says appellate justices don’t read and admire the prose from fellow colleagues in the other state Courts of Appeal? Not us, as the next case demonstrates.

     Marriage of Silverman, Case No. B208172 (2d Dist., Div. 7 Sept. 8, 2009) (unpublished) involved a fairly routine affirmance of a $30,000 “needs” based award under Family Code section 2030 to wife. After all, attorney was a husband and wife was a full-time homemaker lacking a college education, with obvious financial and income-making disparities.

     However, what makes this decision fun reading is Presiding Justice Perluss’s citation to quotes from two of his counterparts in the Fourth District, Division 3. He cites to Presiding Justice Sills’s “own distinctive manner” when quoting from Alan S. v. Superior Court, 172 Cal.App.4^th 238 (2009) (a comment with which we agree, as shown by our post on Alan S. on March 21, 2009). Later, he rejects one of husband’s arguments by quoting Justice Bedsworth, described “as Presiding Justice Sills’s equally colorful colleague,” who rebuffed an argument by saying “hogwash” (Wells Fargo Bank Minnesota, N.A. v. B.C.B.U., 143 Cal.App.4^th 493, 502 (2006) [“That is—not to put too fine a point on it—hogwash.”]).

     So, we know that at least one Second District justice likes what he reads—often times with amusement—from justices authoring opinions in the Santa Ana Court of Appeal.

CCP Section 128.7 Sanctions: Failure To Give Full Safe Harbor Compliance Period Required Reversal Of Sanctions

Second District, Division 7 Overturns Sanctions Where Merits Hearing Was Heard 19 Days Into 21-Day Safe Harbor Period.

     Here is a good one for all of you Code of Civil Procedure section 128.7 fans!

     The lesson from Li v. Majestic Industry Hills, LLC, Case No. B208404 (2d Dist., Div. 7 Sept. 8, 2009) (certified for partial publication) is intuitive, but a great reminder … make sure you—as the litigant requesting sanctions under section 128.7--give your opponent the full 21-day safe harbor withdrawal period. If you don’t, you will risk reversal of the sanctions order. That is exactly what happened in Li.

     There, a party requesting sanctions under section 128.7 ostensibly won. After all, it beat back a motion to vacate and then won the 128.7 sanctions motion, garnering sanctions of $9,750 jointly and severally against the loser and his lawyers. However, there was a problem, and the problem required reversal of the sanctions order.

     The motion to vacate was granted 19 days into the 21-day safe harbor withdrawal period of section 128.7. Sound like a technicality? Hardly.

     The appellate court determined that the full safe harbor period must be given to the 128.7 responding party before sanctions were warranted. Even though the party responding to the sanctions picked the motion to vacate date, the party seeking sanctions had a responsibility to make sure that the opponent had the full 21 days without regard to when the merits motion was heard.

     The solution? The Rutter Group treatise on pretrial civil procedure had the answer: the party requesting sanctions could ask for a continuance of the 128.7 motion or ask the court to shorten time to file its 128.7 motion (effectively reducing the safe harbor period). Also, analogous federal cases under F.R.Civ. P., rule 11 also supported the result, buttressing the reversal of the sanctions award.

In The News … Attorney’s Fees Are The Main Attraction In L.A. Audit Dispute and Broadcom Securities Settlement, And … “Remoras On the Loose” Punctuates Denial of Objectors’ Fee Request In UnitedHealth Group Securities

City Council’s Fee Request May Impede Settlement over Audit Power Dispute.

     City of Los Angeles and the City Controller have been locked in a lawsuit battle over whether the controller’s office can audit the City’s workers’ compensation program. Early on in the lawsuit, Los Angeles County Superior Court Judge Mark V. Mooney issued a preliminary injunction based on his view that the city charter did not give the controller the power to audit the program in the city attorney’s office.

     The parties, especially with new personalities involved on both sides, seem like they want to settle the lawsuit. The stumbling block? City controller’s desire to recoup $100,000 in incurred legal fees, a demand that city does not want to accede to in dismissing the case. The matter is still in the talking stages and apparently not yet resolved.

     For more information on this dispute, see Maeve Reston’s September 2, 2009 article “L.A. councilman wants to halt former officials’ legal fight and ask voters to set power of city controller,” available for reading on the latimes.com website.

Broadcom Backdating Settlement Proceeds May Be Eaten Up In Attorneys’ Fees By Both Sides.

     We synopsize a report by Susan Beck in an article entitled “Broadcom Settles Backdating Case For $118 Million; Lawyers’ Fees Exceed Amount,” available for reading on the American Lawyer.com website.

     Broadcom announced that it recently settled a stock option backdating derivative lawsuit for $118 million (to be funded by Broadcom’s D & O insurers). However, Ms. Beck makes the case that most of the moneys will go to lawyers--$11.5 million for the plaintiffs’ lawyers and $130 million-plus to the defense attorneys representing the 19 officers and directors.

     David Siegel of Irell & Manella, which represents Broadcom, has a different take: the D & O insurers had said they owed nothing, but at least $43.3 million of the defense tab is included in the $118 million being shelled out by insurers. He also characterized the $118 million insurance payment as “a payment to Broadcom for its benefit.”

(Co-contributors Marc and Mike are alumni of Irell & Manella, and enjoyed their time with the firm and the lawyers they practiced with.)

Securities Settlement Objectors – “Remoras On The Loose Again” – Lose Their Request For A Fee Award of $225,000.

     This last one is a story that we cannot resist sharing with you readers out there.

     In our August 12, 2009 post, we reported on the status of the UnitedHealth Group securities lawsuit. We now have an update, but with a twist we think you will enjoy.

     Late last year, U.S. District Judge James M. Rosenbaum approved a settlement in the securities class action lawsuit (which we believe was a stock option backdating case).

     Several weeks later, four attorneys filed a late objection on behalf of objectors, arguing that the requested class counsel fees of $110 million was excessive in nature. Ultimately, Judge Rosenbaum approved the settlement and awarded class counsel nearly $68.4 million in fees (a reduction of nearly $42 million). Taking credit for this reduction, objectors then filed their own fee request for some $225,000.

     Judge Rosenbaum was not amused, but emphatically denied the request in amusing language.

     He started out by stating that “The remoras are loose again.” Judge Rosenbaum found that the objectors contributed nothing to his reduction decision, expressly rejecting the lion’s share of objectors’ arguments directed to the use of paralegals and contract attorneys. Not only was their eight-page-long objection two weeks late, it raised no argument upon which the Court relied in its deliberation or ruling concerning class counsel’s fees motion. He ended on this note: “Objectors’ Counsel are entitled to an award equal to their contribution … nothing.”

     Judge Rosenbaum also defined “remora” based on a dictionary definition. A remora is “any of a family (Echeneidae) of marine bony fishes that have the anterior dorsal fin modified into a suctorial disk on the head by means of which they adhere especially to other fishes.” In other words, suckerfish, fish that attach themselves to bigger sea-dwellers, like sharks, in order to gain transportation and protection.

 

SLAPP Update: Cabral v. Martins Is Published

It Happened on September 4, 2009.

       To our loyal readers, happy upcoming Labor Day. Hope everyone gets some rest and enjoys the break.

       In our August 22, 2009 post, we reviewed Cabral v. Martins, an unpublished decision by the First District, Division 4 that affirmed a $58,400 fee award to three sets of lawyers for winning a SLAPP motion. Cabral also discussed whether child support evasion statutes "trump" the litigation privilege in a SLAPP context. Now, we can report that the appellate court deciding Cabral issued an order publishing the case on September 4, 2009 based on a request by the winning respondents. It can now be cited!

      Again, to all, a happy and safe break.

Short clips on the history of Labor Day from The History Channel.