Eminent Domain: Substantial Inverse Condemnation Fee Award Reversed Because Trial Court Did Not Explain Why It Chose Contingency Fee Amount Versus Hourly Fee Amount

 

Lower Court Failed to Analyze the Factors in Yuki.

     After plaintiffs won a bench award of over $3.4 million in a nuisance/inverse condemnation action, the Second District, Division Two, in Karim v. City of Pomona, Case No. B210049 (May 18, 2010) (unpublished), reversed a favorable attorney’s fees award in favor of plaintiff homeowners under Code of Civil Procedure section 1036 in the amount of $1,184,145.52, with section 1036 providing that the trial court must award prevailing plaintiffs in an inverse condemnation action their reasonable, actually incurred attorney’s fees. (This reversal apparently did not impact a hefty, additional cost award of $510,700.31.) The principal reason was the lower court’s failure to analyze the section 1036 “reasonable fee” factors listed in People ex el. Dept. of Transportation v. Yuki, 31 Cal.App.4^th 1754, 1771 (1995).

     Although fee awards are usually reviewed for abuse of discretion, such abuse can be established where the court fails to follow the applicable legal principles. (City and County of San Francisco v. Cobra Solutions, Inc., 38 Cal.4^th 839, 848 (2006).) That is what happened in Karim.

     Under Yuki, a reasonable fee under section 1036 is gauged by considering these factors: (1) the contingent nature of the fee agreement; (2) novelty/difficulty of the questions involved and the skill required to perform the legal services properly; (3) likelihood that acceptance of the employment would preclude other employment by the attorneys; (4) the amount involved and results obtained; (5) the time limitations imposed by the client or other circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the retained attorneys; (8) the time and labor required of the attorneys; and (9) the informed consent of the client to the fee agreement. (Yuki, supra, 31 Cal.App.4^th at 1771.)

     Because contingency fee agreements are viewed apprehensively by appellate courts in inverse condemnation actions, a reasonable fee under section 1036 must be limited to the lesser of a contingency fee or hourly-based tally under ordinary circumstances. The problem in Karim was that the trial court never indicated why it selected the higher amount based on a 30% contingency “take” versus the $928,348.75 billed on an hourly basis. Beyond that, the lower court never analyzed the factors in Yuki and explained why the plaintiffs’ firm should receive more than it billed on an hourly basis. This “unexplained delta” required a remand, as well as instructions from the appellate court that fees should be apportioned between the inverse condemnation and other claims.