CALIFORNIA ATTORNEY'S FEES

Civil Code Section 1717: Mutuality Of Remedy Means Winner Gets Fees Even If Winner Proves There Was No Valid Contract

Recent Case Illustrates Operation of this Mutuality Principle.

     In Silva v. Tong, Case No. A124903 (1^st Dist., Div. 4 Dec. 11, 2009) (unpublished), plaintiff sought to enforce a purchase offer with an attorney’s fees clause as an enforceable contract even though it was never signed by defendants. Defendants were granted summary judgment, and then sought to recoup attorney’s fees and costs. They requested $80,581 in fees and $3,978 in costs, but the lower court awarded defendants $53,721 in fees and $3,978 in costs. Plaintiff appealed.

     Although her appeal of the summary judgment grant was dismissed based as being untimely in nature, the Court of Appeal decided the merits of the fee award despite ignoring some appellate transgressions (namely, failing to cite to the record and filing a noncompliant appellant’s appendix).

     The appellate panel noted an important policy permeating Civil Code section 1717: mutuality of remedy, that doctrine making a unilateral fees clause bilateral in effect. The mutuality principle at issue in this case was that a party prevailing under section 1717 (an action involving a written fees clause in a contract) is entitled to fees even when it wins on the grounds that the contract was inapplicable, invalid, unenforceable or nonexistent, if the party losing the action would have entitled to fees had it prevailed. (Rainier National Bank v. Bodily, 232 Cal.App.3d 83, 86 (1991).) That principle cemented the fee determination in favor of defendants.

     Plaintiff did challenge the amount of fees awarded, but that was easily dispatched as not being an abuse of discretion (the relevant standard on appeal). After all, the awarded fees were $26,860 less than what was requested by defendants.

     Plaintiff also made an interesting argument that the fee award was out of whack with other fee awards rendered in Alameda County Superior Court. This argument was swatted down with this observation: “ . . . fee awards made in other cases are irrelevant in any event, because they have no bearing on the consideration of the particular factors relevant to the determination of fees in this case.” (Slip Opn., p. 4.)

Post-Arbitration Fees and Judgment Enforcement: Court Of Appeal Considers Some Interesting Fee Award Appellate Challenges In These Two Areas

 

Sixth District Likes Trial Court’s Rulings Across the Board on Fee Issues.

     In Exatron, Inc. DiFrancesco, Case No. H033094 (6^th Dist. Dec. 9, 2009) (unpublished), plaintiff’s prior attorney’s fees and costs award from a contractual arbitration against defendant were affirmed in a prior appellate decision. Nine months later, plaintiff filed for supplemental fees and expenses of $105,919 to confirm the arbitration award, enforce the judgment, and defend the appeal. Ultimately, the trial court determined that plaintiff was only entitled to recover $42,195 in attorney’s fees incurred in enforcing the judgment (the confirmed arbitration award), denying in the process plaintiff’s Code of Civil Procedure section 473 mandatory and discretionary motions to allow the other supplemental fees and expenses.

     Both sides appealed; both sides lost.

Reasonableness Of Fees: If You Are Gonna Challenge, Make Sure You Specify The Bases With Particularity, Whether Substantive Or As To Amount

 

Third District Rebuffs Generalized Challenges to Fee Award, Finding Many Arguments Waived Based on a Lack of Specificity.

     Defendant in Allen v. Fulton, Case No. C059088 (3d Dist. Dec. 9, 2009) (unpublished) got hammered with a $217,422 fees/costs award ($212,473 of which consisted of fees) after summary judgment motions and a bench trial, where defendant and his company were hit with a total damages award of $373,721.73. Defendant appealed the fee award, to no avail.

     The main problem was one of appellate practice: defendant either forfeited or lost arguments because he failed to make them with enough specificity.

     He argued that a statement of decision was necessary on a fee decision, which is downright contrary to existing California law. (Ketchum v. Moses, 24 Cal.4^th 1122, 1140 (2001).)

     Defendant then contended that there were inadequate contractual bases for the award, but the appellate court noted there was a plethora of transactional agreements with fees clauses that could justify the award.

     The next challenge was that the fee award was unreasonable in amount. The problem was that defendant failed to pinpoint the specific entries or amounts that were unreasonable, such that the challenge was waived. “It is not our job to comb the entire [supporting fee] declaration that contains hundreds of time entries to find the 15 that [defendant] claims are ‘readily identifiable’ [as error] . . . “ (Slip Opn., p. 8.)

     Defendant also claimed that the $200,000-plus fee award was disproportionate to the final award, but this was rejected because he ignored the true amount of the full judgment and also turned a blind eye to the contentiousness with which he litigated (and drove up costs).

     Finally, he argued that the trial court had to apportion between compensable and non-compensable fee claims. Wrong, because defendant’s defense intertwined facts in all the causes of action such that no allocation was mandatory.

Homeowner Associations: Ouch!—Condo Owner Stung With $238,000 Fees/Costs Award After Losing Contentious Battle Over Using Disputed Floor Tile In Unit

 

Fourth District, Division 1 Finds Award Disproportionate At First Glance, But Affirms Based Upon Total Review of the Litigation Below.

     Homeowner-homeowner association battles can be very, very contentious and expensive for the losing side—as the next homeowner learned, in a dispute over the floor covering in his condominium unit.

     McGuire v. 235 On Market Homeowners Assn., Case Nos. D053218/054131 (4^th Dist., Div. 1 Dec. 8, 2009) (unpublished) involved a condominium owner who got into an imbroglio with his homeowners association over whether disputed floor tile was an appropriate floor covering in light of noise and acoustical concerns as expressed in certain CC&Rs. Homeowner lost his action, and HOA won judgment on their cross-complaint.

     Then, catering to our existence in the blogsphere, the trial court awarded attorney’s fees of $225,200 and costs of $12,803.50 in favor of HOA and against homeowner.

     Decision on appeal: affirmed, much to the dismay of homeowner.

     Although observing “at first glance . . . this award seems disproportionate to the result in this case (the HOA is now able to enforce its order that McGuire remove three feet and nine inches of tile from the interior of his unit),” the appellate panel’s visceral reaction vanished upon closer review. The appellate record consisted of 16 volumes of records, with two sets of summary and cross-summary judgment motions by both sides. HOA used two different law firms, at different times, which submitted detailed billing statements to show what was done in the litigation. Both firms, together, requested $335,000 in fees, but the trial court only awarded $225,200—a 33% reduction for duplicative or unnecessary fees. Under the circumstances of this contentious litigation, the reviewing court could find no abuse of discretion in the lower court’s fees/costs award. (Children’s Hospital & Medical Center v. Bonta, 97 Cal.App.4^th 740, 782 (2002).)

Three-Fer From Recent California And ABA Monthly Magazines/Papers

 

No. 1: Ellen Peck Reviews “Fees, Fee Agreements & Arbitrations” in December 2009 Edition of CALIFORNIA BAR JOURNAL.

     Ellen R. Peck, an Escondido sole practitioner and former State Bar Court judge, made these points in her recent California Bar Journal article:

• Except in limited circumstances, most private attorneys have to notify clients they do not carry legal malpractice insurance or that it has lapsed/been terminated (Cal.Rule Prof. Conduct 3-410);
• Incentive awards to class action representatives are discretionary and should not be a bargain point in a fee or retainer agreement (Rodriguez v. West Publishing Corp., 563 F.3d 948, 958-959 (9^th Cir. 2009));
• Interest calculations for collecting attorneys must be based on a 365 or 366 day year, not a 360 year, under penalty of being a False Advertising Act violation (Karton v. Dougherty, 171 Cal.App.4^th 133, 138 n.1 (2009));
• A retainer agreement’s predispute agreement for binding fees/costs arbitration is enforcement after Mandatory Fee Arbitration Act requirements are exhausted, with the State Bar website having a good sample form for such an arbitration clause (Schatz v. Allen Matkins Leck Gamble & Mallory LLP, 45 Cal.4^th 557, 574-575 (2009));
• A lawyer must consider withdrawing from representation or making disclosures to clients if he/she contemplates including a Civil Code section 1542 waiver in a settlement agreement with a client over a fee dispute, based on the legal malpractice waiver repercussions flowing from the release (State Bar Standing Comm. on Prof. Responsibility & Conduct Formal Opinion No. 2009-178)); and
• Lawyers are generally prohibited from charging, collecting, or receiving any advance fees or other compensation in connection with loan modification legal services (Bus. & Prof. Code, sec. 6106.3(a); Civ. Code, sec. 2944.6).

No. 2: Hon. Edward G. Weil Indicates Prior Settlement Communications In Fee Disputes May Be Admissible in His Article, “Are Settlement Talks Confidential?”, Published in the December 2009 Edition of CALIFORNIA LAWYER.

     Hon. Edward G. Weil, a Contra Costa County Superior Court Judge and former California deputy attorney general, cautions that prior settlement communications may be admissible in fee dispute litigation, especially private attorney general fee hearings, fee “catalyst” cases, and ambiguous settlement agreement disputes. He also has a nice compendium about the confidentiality and admissibility of settlement discussions in other contexts.

No. 3: Four Substantive Legal Practice Areas Dominate Malpractice Claims Since 1985, Reports James Podgers in “Practice Pitfalls,” Found In the December 2009 Edition of the ABA JOURNAL.

     The ABA Journal article confirms that, between 1985 and 2007 (based on information published in the ABA Standing Committee on Lawyers’ Professional Liability’s annual Profile of Legal Malpractice Claims), four practice field areas have been and still are at the top of the list: plaintiffs personal injury; real estate; family law; and estate, trust and probate. The percentage of all claims reported in the ABA study for 2007 in these top four practice fields break down this way:

• Plaintiffs personal injury – 21.56% (pretty steady, with 21.65% in 1995);
• Real estate – 20.05% (up the most in the top 4, with 14.35% in 1995);
• Family law—10.33% (up slightly, with 9.13% in 1995); and
• Estate, trust and probate – 9.68% (up some, with 7.59% in 1995).

998 Offers: After Excluding Postoffer Costs, Plaintiff Did Not Beat 998 Offer Even Though Lawsuit Release Was Part Of The Deal

Second District, Division 5 Affirms Routine Costs Awarded to Defendant.

     Code of Civil Procedure section 998 offers are tricky. They require careful evaluation when received. In the next case, plaintiff—not by much—failed to prevail against a 998 offer and was hit with an adverse costs award. Loser raised a lot of arguments on appeal, but to no avail in the wake of a definite 998 offer

     In Mkrtchyan v. Chawla, Case No. B211529 (2d Dist., Div. 5 Dec. 4, 2009) (unpublished), plaintiff won a jury award of $5,640 in damages against defendant, who earlier had sent a 998 offer to settle for $9,000 as long as plaintiff would release defendants and affiliates from all claims which were the subject of the pending personal injury case—even though the 998 offer had some clerical mistakes. Plaintiff had earlier not accepted the offer, but here is the rub. Once the postoffer costs were excluded from the calculation (because they are under section 998), plaintiff’s judgment only totaled $8,664.78, a few hundred dollars short of the $9,000 offer. This portended bad things for plaintiff, with the trial court eventually awarding defendant about $14,500 in costs, denying plaintiff’s motion to tax costs except for a minor item.

     Plaintiff’s appeal did not succeed in its challenge to the costs award based on defendant beating the 998 offer.

     Plaintiff mainly argued that the 998 offer was valid based on the release attached as a condition to the offer. Not so, under these circumstances. Unlike other cases (where unrelated or future claims were asked to be released), defendant only wanted a release relating to claims in the lawsuit—a request that does not invalidate a 998 offer. (Linthicum v. Butterfield, 174 Cal.App.4^th 259, 271-272 (2009); Goodstein v. Bank of San Pedro, 27 Cal.App.4^th 899, 907-908 (1994).) There was no overreaching by the defendant in structuring the 998 offer.

     Plaintiff also complained that the 998 offer was fatally defective because the acceptance line mistakenly stated that plaintiff’s attorney was representing a different party—a misnamed plaintiff. No go, said the appellate panel, because the obvious typographical error did not render the 998 offer invalid. (Slip Opn., at p. 13.)