CALIFORNIA ATTORNEY'S FEES

Multipliers: New Jersey Supreme Court Grants Certification Of Fee Enhancement Reversal Based On Perdue v. Kenny A.

 

Walker v. Giuffre Is the Case Under Review.

     In Walker v. Giuffre, 415 N.J. Super. 597 (App. Div. 2010), the Appellate Division reversed a 45% fee enhancement to plaintiffs’ attorneys under the New Jersey Consumer Fraud Act and New Jersey Truth in Consumer Contract, Warranty, and Notice Act. The Appellate Division did so based primarily on Perdue v. Kenny A., 130 S. Ct. 1662 (2010) [reviewed in our prior April 24, 2010 post], where the U.S. Supreme Court majority indicated fee enhancements should be available in only rare and exceptional cases.

     However, the New Jersey Supreme Court fairly recently granted certification to review the fee enhancement issue in the case in light of the Appellate Division’s reversal.

     We would like to thank Bruce D. Greenberg, who has a blog called New Jersey Appellate Law, for bringing this to our attention in his February 11, 2011 post.

          

 

           Above:  Circular Slide Rule from the Museum of HP Calculators.

In The News . . . . Dusseldorf, Germany Appeals Court Issues A Decision Telling Attorneys/Litigants “Thou Shalt Not Lie”

Value of Litigation Estimates Cannot Be Understated, Denying Public Fisc Its Due.

     Finally, as we wish our readers a Happy Memorial Day break (and our deep tribute to our troops and past veterans either living or deceased/their families), an interesting news tidbit drew our interest to the title of a recent decision by the Dusseldorf Appeals Court.

     Apparently, this German appellate court--which is the leading German patent infringement appeals court--issued a decision with the unorthodox title, “Thou shalt not lie.” This title arose out of litigants’ obligations to disclose the value of the litigation in good faith. In a concept unique to Germany, “value of litigation” is the plaintiff’s interest in the claims asserted (example: compensatory damages plus future injunctive relief), with plaintiff getting the first opportunity to propose the value (something which must be done in good faith) and with defendant being able to object--but with the trial court deciding the ultimate value based on its own discretion.

     The importance of this “value of litigation” principle is that it is tethered to the statutory attorney’s fees and statutory court fees that can be awarded. In first-time patent infringement proceedings, statutory attorney’s fees are about 1.5% of the value of litigation, while statutory court fees (seemingly first payable by plaintiff but reimbursable by the losing party to the public fisc) are about 1% of the same value. Contingency fees are allowable in only the rarest of cases, and it is an ethical violation for German attorneys to attempt undercutting of statutory fees.

     What apparently was developing in some patent infringement cases was tantamount to a “subtle conspiracy” by plaintiff and defendant where the value of litigation estimate was intentionally understated (and not challenged by the defense) to avoid a large upfront payment of statutory court fees. There was also another motive behind this understating: German lawyers are increasingly resorting to billing cases by the hour, encouraging law firms to set cheap basic fees (based on a low value of litigation) but push up the hours billed on the cases and staff cases more intensively than with streamlined staffing more closely tied to realistic value of the litigation assessments.

     These practices inspired the “Thou shalt not lie” decision by the German appeals court. The court allowed the winning party to readjust the value of litigation estimates after a decision on the merits, which could mean that the losing party bears much more in statutory costs (way beyond litigation budgets based on the low value of litigation estimates). The thinking behind the decision was to encourage the parties to make realistic assessments upfront so as to avoid back-end surprises. Also, defrauding the public fisc carries criminal and ethical repercussions for parties and their attorneys.

     We thank Gottfried Schull of Cohausz & Florack for this tidbit; his entire article on the subject can be obtained by going to a May 25, 2011 post in the International Report section of IAM Magazine.

        Above:  Charlton Heston searches for early precedent for Second Amendment.

Substantiation Of Reasonableness Of Fees: Second Circuit Court of Appeals Rules That Contemporaneous Time Records Need To Be Presented For Fee Recovery In All But Rarest Of Cases

Federal Decision Highlights Differences Between Federal Versus California State Approaches; Second Circuit Does Allow Attorney an Equitable “Fallback” Approach.

     At the California state law level, although it is a good idea to keep them, contemporaneous time records are not required substantiation in fee proceedings. (Chavez v. Netflix, Inc., 162 Cal.App.4th 43, 64 (2008).) Beyond that, the trial judges can base fee awards on their own independent determinations of the value of the legal services rendered. (PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1096 (2000).) However, a much different set of constructs governs fee awards at the federal level, as a recent federal appellate decision reveals.

     Scott v. City of New York, __ F.3d __, 2011 WL 1990806 (2d Cir. May 24, 2011) involved a district judge’s award of $515,179.28 in attorney’s fees to plaintiff’s attorney pursuant to the Fair Labor Standards Act’s fee shifting provision, 29 U.S.C. § 216(b). The problem was that attorney failed to keep contemporaneous time records, such that the district judge even on remand sustained the fee award based on her “personal observation” of the attorney’s work.

     The Second Circuit vacated and remanded for reconsideration.

     The reason was that New York State Ass’n for Retarded Children, Inc. v. Carey, 711 F.2d 1136 (2d Cir. 1983) essentially established a hard-and-fast rule that contemporaneous time records were needed as fee substantiation in all but the rarest of cases. The district court’s reliance on “personal observation” of attorney’s work did not suffice because “it is difficult if not impossible for courts of appeal to meaningfully review awards based entirely on a district court’s sense of fairness.” (Scott, supra, 2011 WL 1990806 at *2.)

     However, it did attempt to come up with an equitable compromise. Despite the absence of contemporaneous time records, the Second Circuit did allow the attorney to present his time by analysis of official court records (such as the docket, minute entries, and transcriptions of proceedings) as substitute reliance documentation of compensable hours. The onus was on the attorney, not the district court, to make this analysis, with this approach not running afoul of Carey and with “such a regime prevent[ing] a totally inequitable result in cases such as this . . . .”

     The appellate court also found that a $550 hourly rate was reasonable in nature.

Allocation: Trial Court Did Not Abuse Its Discretion By Not Apportioning Out Work on Interrelated Claims When Fashioning Fee Award

$239,649.87 Fee Award Sustained on Appeal in Civil Rights Case.

     Defendants were found by jurors to have inflicted emotional distress on plaintiff, and one defendant was found to have violated the Ralph Civil Rights Act of 1976 (Civ. Code, § 51.7) by committing/threatening violence based on plaintiff’s gender. Because the Ralph Civil Rights Act has a fee-shifting provision, plaintiff sought to recover fees of $251,136.84. The lower court awarded plaintiff fees of $239,649.84, excluding time on some abandoned and unsuccessful work on certain activities.

     In Hern v. McEllen, Case No. A125358 (1st Dist., Div. 5 May 27, 2011) (unpublished), losing defendant in the fee proceeding suggested that the award had to be reversed because the lower court failed to apportion out time on another unsuccessful claim.

     This one lost. Although apportionment of compensable versus noncompensable time can be done in the trial court’s discretion, it does not have to be done where the work is found to be interrelated on the two claims or the facts were “inextricably intertwined.” That was the case here between the two claims, such that the trial court did not abuse its discretion in failing to make any further allocation--its decision was not “clearly wrong.”

     Click on the image above to learn more about the world’s largest ball of twine.  For a video and the lyrics to “Biggest Ball of Twine in Minnesota,” click here.

Appeal/Section 998: Prevailing Party Status From Rejected 998 Offer Examined In Fifth District Opinion

Primer on Allocation of Preoffer/Postoffer Costs in Instructive Decision.

     Code of Civil Procedure section 998, as we should know by now, is a legislatively-mandated statute that modifies the general routine costs provision of CCP § 1032 by augmenting or withholding the costs normally allowable under section 1032. Put another way, section 998 establishes a procedure for costs shifting upon a party’s refusal to settle. (Westamerica Bank v. MBG Industries, Inc., 158 Cal.App.4th 109, 128 (2007).)

     The Fifth District, in Warfield v. Chandler, Case No. F059208 (5th Dist. May 27, 2011) (unpublished), offers us a great primer on how sections 998 and 1032 operate for purposes of determining the prevailing party and then what must be done to augment/withhold recovery of certain costs depending on who “won” the 998 costs-shifting battle.

     Warfield involved a situation where plaintiff rejected a 998 offer that exceeded the award she ultimately received from the jury. (Under 998, in this situation, plaintiff may only recover preoffer costs, plaintiff cannot recover postoffer costs, and defendant may recover postoffer costs.) The trial court, however, got a little confused because the postoffer costs incurred by the defense exceeded the total judgment in plaintiff’s favor, so that it then decided the defendant was the costs prevailing party--awarding preoffer costs to the defense pursuant to section 1032(b). Plaintiff appealed this costs ruling.

     In a twist we see often, even though it agreed there was error, the appellate court affirmed because plaintiff appealed the prior judgment without appealing the postjudgment order relating to costs. That meant the court was without jurisdiction to hear the matter. (Kajima Engineering and Construction, Inc. v. Pacific Bell, 103 Cal.App.4th 1397, 1402 (2002).) However, the appellate court discussed the issue so it “may preclude repetition of the error” by the trial judge.

     The lower court should have followed this two-step methodology rather than dub someone the prevailing party after doing the preoffer/postoffer calculus: (1) the trial court determines the prevailing party utilizing the general rule of section 1032 and determine recoverable costs as permitted by section 1033.5; and (2) the trial court then augments or withholds the amount determined in step one pursuant to the dictates of section 998. “After these two steps are completed, the trial court’s cost award is complete.” The main flaw was that the trial court did not have authority to award a defendant preoffer costs pursuant to section 998(c).

     We thank Justice Cornell, on behalf of a 3-0 panel, for the 998/1032 primer.

Discovery Sanctions: Blocking Deposition Questions On Prior Stress Events Justified Discovery Sanctions Against Plaintiff And His Attorney

 

Vinson Allows Such Inquiries During Discovery.

     Where a plaintiff in a wrongful termination suit puts his/her medical condition into controversy, Vinson v. Superior Court, 43 Cal.3d 833 (1987) held that an IME/psychological exam was fair game because this condition was at issue in the suit.

     In like vein, Acting Justice Rylaarsdam on behalf of a 3-0 panel in Cashman v. SWH Corp., Case No. G044531 (4th Dist., Div. 3 May 26, 2011) (unpublished) sustained discovery sanctions of a little over $6,500 against plaintiff and his attorney when plaintiff refused to answer questions about prior stressors in an employment case. Vinson was found on point so as to uphold the sanctions award.

     Plaintiff challenged the sanctions award against his attorney. Although there were standing problems with this attack, the appellate court found that seeking these sanctions through the memorandum of points and authorities was adequate notice that they were being sought against the attorney. (Contrast In re Marriage of Fuller, 163 Cal.App.3d 1070, 1077 (1985) [nothing in notice, pleading, declaration, or memorandum indicated that sanctions targeted against a particular litigant].)

     BLOG OBSERVATION--Although this was an appeal from a sanctions grant, co-contributor Mike remembers his days of practicing in Los Angeles County Superior Court where many judges would deny sanctions request outright against an attorney or other litigant unless the sanctions request was made in the Notice of Motion as well as highlighted in the caption of the Motion request (even if the request was contained elsewhere, such as in a supporting memorandum).

Section 998: Valid 998 Offer Dispute Remanded On Issue Of Receipt By Offeree

 

Trial Court Must Focus on Receipt Issue.

     This next case takes us back to evidence class sessions in law school. It involves presumptions, so relax and go back in time to days past in your educational experience.

     Plaintiff won a warranty dispute against Ford Motor Company, who said that it sent a valid CCP § 998 offer that beat the jury award to plaintiff. However, plaintiff claimed that it never received the offer. The trial court allocated preoffer and postoffer costs, awarding some to plaintiff and some to defendant. This prompted an appeal by plaintiff.

     In Robey v. Ford Motor Co., Case No. A127796 (1st Dist., Div. 3 May 26, 2011) (unpublished), the appellate court remanded on the issue of whether plaintiff received the offer. Although Evidence Code section 641 creates a presumption that a 998 offer properly mailed is presumed to be received, this presumption of receipt disappears when met by contradictory evidence--here, plaintiff’s claim that he did not receive the offer. The record was unclear whether the trial court ruled on this issue, although the determination might be academic given some circumstantial proof that the offer was not received (unless the lower court rejects the credibility of the witnesses on this point).

     The appellate court also rejected other creative challenges to the 998 offer by plaintiff. First, it dismissed the notion that the 998 offer has to allocate the offered sum betweeen damages and sought-after attorney’s fees, citing Federal Rule of Civil Procedure rule 68 decisional law to back its conclusion. (See Marek v. Chesny, 473 U.S. 1, 6-7 (1985).) Second, the reviewing court found nothing wrong about a 998 offer to a party and his counsel, dismissing that this was analogous to a lump sum invalid offer to multiple parties.

Pleading: Complaint Does Not Have To Specify The Dollar Amount Of Attorney’s Fees To Justify Default Judgment Based On Future Terminating Sanction Conduct

 

Extensive Opinion Shows Why Due Process and Policy Reasons Justify End Result:  Lex non cogit ad impossibilia.

     In an extensive opinion, the Second District, Division 1 has decided that unspecified attorney’s fees in a complaint can justify a later default judgment entered as a terminating sanction, without offending due process rules applicable to other type of relief (usually, various components of more traditional damages for which some notice has to be given).

     The case that so holds is Simke, Chodos, Silberfeld & Anteau, Inc. v. Athans, Case No. B222175 (2d Dist., Div. 1 May 26, 2011) (certified for publication), authored by Presiding Justice Mallano on behalf of a 3-0 panel.

     Attorney’s fees were deemed not to be the type of “relief” required for articulation under Code of Civil Procedure section 580, in contrast to other types of recovery. Beyond that, common sense prevailed as far as due process analysis was concerned--after all, how could a litigant ever know the amount of fees to be incurred for future discovery violations so as to notify an opposing litigant in advance? As expressed by the appellate court in a paraphrase of a well-known maxim: “The law[, including due process,] never requires impossibilities.”  Cal. Civ. Code section 3531.

Fee Clause Interpretation: Pursuing Reserved Appellate Rights Did Not Give Rise To Fee Recovery Under Settlement Agreement Fees Clause

 

$35,000 Fee Award Vacated By Second District, Division 5.

     Where the contents of a contractual fees clause is clear in nature (with no factual disputes), this sets up an issue of law that an appellate court can review de novo. (Winet v. Price, 4 Cal.App.4th 1159, 1165-1166 (1992).) That is exactly what happened in the next case that we survey.

     The parties in Carr v. Torrance Memorial Medical Center, Case No. B225255 (2d Dist., Div. 5 May 25, 2011) (unpublished) had reached a written settlement after plaintiff lost a summary adjudication motion in a wage and hour case. The settlement did allow plaintiff to reserve his right to appeal the adverse summary adjudication, but stipulated that he released and dismissed all claims. There also was a fees clause in the settlement, covering any “dispute . . . over the enforcement of [the] Agreement.” Plaintiff did appeal, but that was dismissed when the appellate court earlier determined that the dismissal and release of that claim rendered the reservation of the right to appeal ineffective in nature. [PRACTICE POINTER--Be careful how you structure a settlement that preserves appellate issues for review; releases and dismissals obviously can undermine the intent of the parties.]

     The trial court awarded the defense $35,000 in attorney’s fees under the settlement fees clause.

     Reversed. The reason? The parties had agreed that plaintiff could appeal the summary adjudication motion. Plaintiff’s appeal did not concern enforcement of the settlement at all; in fact, one could argue that plaintiff only was seeking to enforce the one preserved claim remaining. The fees clause did not encompass what was done in this case.

Section 998: 998 Offer Invalid Where No Acceptance Language Included In Offer

 

Statutory Construction of 998 Was Unclear, Nullifying $5,350 Expert Witness Fee Award.

     We have seen a recent flurry of decisions in the CCP § 998 area. The next one, from a published decision perspective, trailblazes on the issue of whether a § 998 offer with no acceptance language can survive an invalidity attack.

     It did not, ruled our local Santa Ana appellate court, in a 3-0 opinion authored by Justice Moore in Puerta v. Torres, Case No. G043745 (4th Dist., Div. 3 May 25, 2011) (certified for partial publication on the 998 issue).

     The defense’s $5,350 expert witness fee award was predicated on the lower court’s determination that the 998 offer was valid. Not so, said the appellate court, because there was the absence of a Notice of Acceptance line mandated under 998 amendments. Justice Moore did suggest a couple of acceptable alternatives: “The Judicial Council form section 998 offer (CIV-090), for example, includes a signature line to indicate acceptance. A sentence in the offer stating that acceptance could be indicated by return letter might be equally acceptable.” (Slip Opn., p. 12.) The absence of any language regarding acceptance was damning in this one.

     BLOG UNDERVIEW--The Second District came to the same conclusion in the unpublished decision of Sargon Enterprises, which you can review by going to our February 10, 2011 post.

Section 1717: Broadly Worded Fee Clause Meant Fees Had To Be Apportioned When Lease Only Signed By One Of The Defendants

 

Wild Landlord-Tenant Dispute Gives Rise to Reversal of $212,685 Fee Award Against Both Signing and Nonsigning Defendants.

     Robertson v. Sapir, Case No. B224458 (2d Dist., Div. 3 May 24, 2011) (unpublished) was a “wild” landlord-tenant dispute including reported accusations of landlord’s brother (a tenant in a boarding room type of arrangement) bothering a nearby female plaintiff tenant, calling her a “French bitch”, smearing feces on a car windshield of another tenant, and chasing another tenant’s boyfriend on a couple of occasions at least. This behavior did reap plaintiff tenants respective favorable jury verdicts ranging from $3,900-$8,000 against various of the defendants on divergent tort and inhabitability claims. However, to show you how fees are the tail that wag the litigation dog, the lower court awarded plaintiffs’ counsel postjudgment attorney’s fees of $212,685 (100% of the requests) as against a lease signatory defendant and signatory’s father, with father as agent signing the lease on behalf of the named signatory. Both appealed the fee award.

     The appellate court reversed on several grounds. First, the record showed that father signed the lease on behalf of the signatory, who was bound as a principal for fee exposure based on a broadly worded fees clause encompassing both tort and contract claims. However, the agent himself--even if his conduct was wrongful--could only be liable for tort rather than contractually-based exposure. That meant that father was off the hook for the fee award. Second, with respect to the principal signatory, fees needed to be apportioned because a lot of the work related to the brother’s actions rather than signatory’s conduct, making a substantial fee award for all work an unfair “hit” for the signatory alone. Also, there were 998 offers that needed to be reevaluated after the reversal. Finally, the award to counsel for plaintiffs was unwarranted because the attorneys were not parties to the lease, with the appellate court unaware of any authority for making such an award pursuant to Civil Code section 1717.

Ethics: Attorney’s Failure To Comply With Rule 3-300 Voided Successful Business Arrangement With Client

 

Quantum Meruit Recovery Denied to Attorney.

     California Rule of Professional Conduct 3-300 requires an attorney entering into a business transaction with a client to make the transaction fair in nature, put it in writing, advise the client in the writing to seek the advice of an independent lawyer, and then have the client consent in writing to the terms of the transaction. A corollary to this rule is Probate Code section 16004, which creates a presumption of undue influence when a trustee obtains an advantage from the beneficiary during the existence of a trust. Section 16004 has been applied to the fiduciary relationship between attorney and client. (BGJ Associates v. Wilson, 113 Cal.App.4th 1217, 1227-1228 (2003).)

     Now, the First District, Division 2 has published a 38-page decision, Fair v. Bakhtiari, Case No. A126844 (1st Dist., Div. 2 May 24, 2011) (certified for publication), that is must reading in the area of ethics. Even though attorney and client entered into a successful business venture, the attorney’s violation of rule 3-300 and section 16004(c) not only resulted in a voiding of the business agreements but also resulted in a loss of quantum meruit recovery by the attorney for the reasonable value of the services he provided to the clients. Pretty harsh result, but one squarely within these important ethical constraints.

     BLOG UNDERVIEW--Co-contributor Marc recently went to a UCLA School of Law reunion. Among others that he caught up with was James I. Ham, who co-contributor Mike knows from growing up in the Central Valley (Mike went to Bullard High; Jim went to Clovis High) and USC undergrad days. Jim has developed a specialty in legal ethical issues and is a partner with South Pasadena-based Pansky Markle Ham LLP. His co-partner, Ellen Pansky, is well known for lecturing, writing, and providing advice on legal ethical issues too. Our hello goes out to Jim.

Section 1717: Work Authorization Fee Clause Justified $102,025 Fee Award

Work Authorization Was Part of the Contract, Sustaining Fee Recovery.

     Cooley’s General Pest and Termite Control, Inc. v. Westlake Bay Homeowners Assn., Case No. B221937 (2d Dist., Div. 6 May 24, 2011) (unpublished) is a case where an HOA was hit with a $102,025 attorney’s fees award under Civil Code section 1717. (Could have been worse, because plaintiff termite company requested $129,217.35 in feees.) HOA sought to rescind a termite eradication contract, but lost. Termite company won fees based on a fees clause in a work authorization attached to 31 inspection reports submitted to HOA.

     HOA’s appeal of the fee award did not succeed. In response to the argument that the work authorization was not a contract, the appellate court responded “get out of here” (but in much more refined reasoning--after all, we have to keep everyone awake once in a while). The overall “deal” showed that the work authorization was part and parcel of the contractual bargain, with integrated documents being considered part of the gestalt. Fee award affirmed.

In The News . . . . Late Breaking Update on MGA Entertainment-Mattel Bratz Doll Fee/Costs Motion

 

Postponed Until May 25, 2011

     As we reported to our readers over the weekend, MGA Entertainment is seeking substantial fees and costs from Mattel based on its recent jury trial win in federal court, Bryant v. Mattel, Case No. 04-09049 (C.D.Cal.). Although Mattel is seeking to overturn the jury verdict, it has now been officially reported that MGA is seeking attorney’s fees of $129.7 million and costs of $32.4 million, as well as punitive damages of $177 million and restitution of $4.3 million. All of these dueling motions by both sides apparently will be heard by U.S. District Judge David O. Carter soon, on Wednesday, May 25, 2011.

Family Law Awards: Recent Unpublished Decision Reviews Deadlines For Claiming Section 271 Fee Recovery

 

Second District, Division 6 Does So While Affirming $75,000 Sanctions Award.

     In Marriage of Lancashire, Case No. B217022 (2d Dist., Div. 6 May 23, 2011) (unpublished), the Second District, Division 6 discussed deadlines for bringing attorney’s fees motions based on sanctionable conduct of family law litigants under Family Code section 271 before it affirmed a $75,000 sanctions fee award to husband.

     Here is what the court had to say in a 3-0 opinion by Justice Yegan:

     *A 271 motion for attorney’s fees on appeal in affirming a prior sanctions award must be filed no later than 40 days after issuance of the remittitur (In re Marriage of Freeman, 132 Cal.App.4th 1, 7 (2005));

     *In a case involving false accusations of child abuse, 271 sanctions request must be filed within 60 days after service of notice of a judgment exonerating the litigant seeking sanctions or 180 days if no notice is sent (Robert J. v. Catherine D., 171 Cal.App.4th 1500, 1504 (2009)); and

     *A motion for pre-judgment fees for sanctionable conduct must be filed within the deadlines for filing a notice of appeal from the sanctions judgment order at issue pursuant to Cal.Rules of Court, rule 3.1702(b).

Probate: $8,500 Fee Award Reversed Because Probate Code Section 17211(b) Requisites Not Met

Neither the Conditions of the Trust Nor Fee-Shifting Statute Were Met Here.

     In our March 24, 2010 post, we discussed the fee-shifting parameters of Probate Code section 17211(b) in the context of Leader v. Cords, 182 Cal.App.4th 1588 (2010). Leader has been discussed in other posts, namely, our March 24, 2010 post on Leach (unpublished) and June 15, 2010 post on Soria (published). It has surfaced, yet again, in the next unpublished decision we examine.

     Scichilone v. Duguay, Case No. D057435 (4th Dist., Div. 1 May 23, 2011) (unpublished) involved stepdaughters challenging the accounting from stepfather under a trust after his wife died. The trial court awarded stepdaughters attorney’s fees of $8,500 under Probate Code section 17211(b) because of its perception that stepfather had been dilatory in a trust accounting, although they did get the information.  Stepfather appealed.

In The News . . . . Caltrain and California High-Speed Rail Authority Clash On Who Owes What On Fees

 

May Not Be That Significant, But Rift Is There.

     As reported by Will Reisman in his May 22, 2011 post on the on-line version of The San Francisco Examiner, Caltrain and the California High-Speed Rail Authority are not simpatico on “splitting” certain attorney’s fees racked up by Caltrain.

     There seems to be a dispute over $108,834 in legal fees involved between the two, but the Authority claims it is not obligated to pay any of the disputed fees because they were not encompassed within other 50/50 costs agreed to be divided between the two entities. It may not be that signficant given that there is a total of $2.2 million in Caltrain reimbursement requests at issue. However, it does give some insight into intra-governmental fights when public fiscs are dwindling in nature.

1906 SF Earthquake Fault.   USGS photograph.

Section 998: “Monster” Decision On 998 Offer Interpretation--Offer Including “Costs,” If Accepted, Also Includes Attorney’s Fees

 

Another “Bright-Line” Rule Emanates In Recent 998 Decision.

     Engle v. Copenbarger & Copenbarger, 157 Cal.App.4th 165, 168-169 (2007) announced a “bright-line rule” in the CCP § 998 area: a defense offer silence as to costs and fees means that they are excluded from the ambit of the offer, such that plaintiff should have recovered both. Well, that is hardly the end of the story.

     Another “bright-line rule” emerged in Martinez v. Los Angeles County Metropolitan Transp. Auth., Case No. B221234 (2d Dist., Div. 1 May 23, 2011) (certified for publication). And exactly what is that “bright-line rule?” A 998 offer excluding “costs” alone, unless expressly stated otherwise in the offer, also excludes “attorney’s fees” because they are costs encompassed within the definition of related statutory provisions.

     There you go, practitioners. Another case in which 998 offers must be explicit in what they encompass; failure to specify otherwise could result in disaster.

     Justice Rothschild, on behalf of a 3-0 panel, provided the clarification here.

In The News . . . . Bratz Doll Manufacturer Moves To Recover Substantial Fees After Winning Over Mattel In Federal Copyright Infringement Case

Amount Has Not Been Disclosed, But Rumors Have it At Hovering Around $150 Million.

     Bratz doll manufacturer MGA Entertainment, Inc., fresh after its copyright infringement win in a jury trial venued in Santa Ana federal court against Mattel, has moved to recover fees of an unknown amount through recently-filed, redacted motion papers. In support of its request, MGA reminded U.S. District Court Judge David O. Carter that Mattel spent $400 million on fees and expenses during the 6 years of litigation over the Bratz doll. District Judge Carter ordered that a fee expert review billing records in the case.

     MGA is seeking fees under 17 U.S.C. § 505, a copyright statutory provision allowing a court to award fees in its equitable discretion, not restrained by having to find the matter was frivolous, brought in bad faith, or an exceptional case as conditions to any fee recovery.

     However, MGA’s CEO Isaac Larian has publicly estimated that his company spent $150 million in fees to litigate the matter. Stay tuned for further developments.

Lodestar/Reasonableness Of Fees: Two Drastic Haircut Fee Decisions--One Reversed And One Affirmed

Justice Bedsworth Gives Us Two Fee Case “Gems.”

     Justice Bedsworth, who sits on the Fourth District, Division 3 (the venue where co-contributors Marc and Mike are based practice-wise), has written two interesting decisions on lodestar/reasonableness of fees. Both involved trial court decisions dramatically cutting fee requests. On appeal, one got reversed and the other got affirmed in 3-0 unpublished decisions. So, here we go on what was at play in each.

More Beds (above) (below)

Haller v. Chiya, Case No. G043566 (4th Dist., Div. 3 May 19, 2011) (Unpublished).

     In a somewhat unusual personal injury case where passenger sued driver/owner of the car when driver fell asleep and struck a parked car off the road, plaintiff passenger--who was injured quite severely--served driver with a $250,000 998 offer after learning of insurance coverage limits. Defendant driver accepted, with plaintiff then seeking $100,000 in attorney’s fees under Code of Civil Procedure section 1021.4 (a fee shifting statute allowing recovery of fess against a defendant who has been convicted of a felony). However, the trial court only awarded $5,150 in attorney’s fees.

     The appellate court ruled that the lodestar adjustments must be explained by stating each reduction factor and dollar adjustment, something not done in this situation. Because the payment to plaintiff did not occur until deep into the case, the fee award should have been justifiably higher, constituting an abuse of discretion even under the deferential standard.

Worley v. Storage USA, Inc., Case No. G043613 (4th Dist., Div. 3 May 20, 2011) (Unpublished).

     This case was an appeal from a prior appellate remand where a $20,000 fee award in a class action (out of a requested $263,606 in fees) was reversed because the lower court was unclear on what method was used to determine the award--value of the case approach (not used in California), a contingency measure, a common fund approach, or lodestar method. The prior reversal was necessitated by the less than 10% fee request award needing to be recalculated through adherence with the proper lodestar method. (See our December 23, 2009 post for a synopsis of the prior appellate decision.) On remand, the trial court reexamined the evidence and determined $26,543.10 was a reasonable fees/costs award.

     On appeal the second time, the appellate court affirmed the fee award. Here, plaintiffs argued that the lower court did an improper “double dip”--namely, reducing the lodestar for various inefficiencies/duplications and then applying a .15 multiplier that resulted in a 85% lodestar discount. Justice Bedsworth, on behalf of the reviewing panel, found this approach was proper, because the cases cited by plaintiffs involved the inverse (increasing the lodestar figure and then using the same factors to add a positive multiplier, which impermissibly gave the fee claimant two separate multipliers). In this instance, the trial court’s power to do what it did was authorized under Chavez v. City of Los Angeles, 47 Cal.4th 970, 990 (2010) [one of our Leading Cases], allowing the lower court to deny completely an inflated request. The lower court decision in this situation “does not reflect ‘double-counting’ of the same factor, as the [plaintiffs] claim, but instead demonstrates the court’s express authority to go beyond simply fixing the inflated request, and take additional action designed to affirmatively discourage such conduct.” (Slip Opn., p. 11.)

Reasonableness of Fees: $175,361.02 Fee Award To Winning Plaintiff Stands Because Abuse of Discretion Deferential Standard Could Not Be Surmounted

 

Case Highlights How Fee Recoveries Can Be Substantial in Fairly Standard Real Estate Cases.

     Mehrabian v. Meruelo Maddux Properties-Ponte Vista, LLC, Case No. B219623 (2d Dist., Div. 1 May 19, 2011) (unpublished) is not so remarkable for its conclusion, but highlights the high costs of fairly standard real estate litigation and demonstrates the difficulty for a nonprevailing party to defeat the abuse of discretion standard when the only challenge is to the reasonableness of a fee award.

     In a purchase and lease dispute involving adjoining parcels of real estate, plaintiff/cross-defendant prevailed on both the complaint and cross-complaint. A fees clause then allowed the trial court to award plaintiff fees of $175,361.03 (out of a requested $222,943.02) on the complaint and $42,266.02 (out of a requested $169,064.08) on the cross-complaint. Defendant only appealed the fee award based on plaintiff’s win under the complaint.

     The Second District, Division 1 affirmed. Defendant simply could not beat the deferential abuse of discretion standard. The trial court did reduce the complaint fee request by the exact amount delineated by defendant, with it not having to do more and with the defense not clearly demonstrating why a further haircuit was necessary. The lower court’s decision to reduce fee requests by only 10% for general inefficiencies and allow $200 hourly rates for attorneys with less than five years’ experience was not erroneous given the fee petition submissions by plaintiff.

In The News . . . . Dentist Incurs SLAPP Fees in Yelp Lawsuit, L.A. County Pays Fees to Defend Anaheim Man’s Personal Injury Lawsuit, and California Metro Area Lawyer Average Annual Pay Statistics Are Now Available

 

Court to Dentist: You Owe $80,714 in Fees to SLAPP Defendants in Yelp Lawsuit.

     As reported by Donna Domino in a May 17, 2011 post in Practice Management, California dentist Dr. Yvonne Wong was SLAPPed in a defamation suit against a patient’s parents and Yelp.com over negative reviews, following on the heels of an appellate court decision saying her claims should have been dismissed. On May 12, 2011, Santa Clara County Superior Court Judge Peter Kirwan ordered Dr. Wong to pay parents and Yelp $80,714 in attorney’s fees, reducing down the fee request of $113,620.

$243,314 Paid to Date By Los Angeles County to Defend Anaheim Man’s Personal Injury Lawsuit Arising from Car Accident With Former Sheriff Detective.

     Greg Hardesty, in a May 19, 2011 article in The Orange County Register, reports that Los Angeles County Counsel has acknowledged that lawyers have been paid $243,314 in attorney’s fees to date to defend the County in an Anaheim man’s personal injury lawsuit arising out of a car accident with former County sheriff detective Robert Andrew Moran who was found to have a blood alcohol level of more than .08%. L.A. County supervisors, on May 17, approved a $4.75 million settlement in the case. Mr. Moran now works as a L.A. patrol deputy, according to the article.

California Metro Area Lawyer Average Pay List Released.

     According to an article by Mary Ann Milbourn in the May 19 The Orange County Register, recent statistics for 2009 break down the average annual pay for lawyers in U.S. major metropolitan areas, with lawyers in Califiornia metro areas taking eight of the top 10 pay slots. Here is the breakdown by metro area and average annual 2009 pay: (1) San Jose -- $192,020; (2) Santa Rosa -- $170,860; (3) Napa -- $170,400; (4) Madera -- $167,980; (5) San Francisco-San Mateo -- $167,130; (6) New York-White Plains-Wayne, N.Y.-N.J. -- $166,130; (7) Orange County -- $157,950; (8) Los Angeles -- $155,120; (9) Modesto -- $153,540; and (10) Wilmington,Del.-Md.-N.J. -- $153,520.

     Other statistics are interesting for our local area. There were 6,380 lawyers in Orange County in 2009, about one for every 474 people. The $157,950 annual pay broke down to $75.94 an hour compared to the annual 2009 pay for all Orange County occupations which clocked in at $50,700.

Special Fee Shifting Statutes--Environmental: District Court Erred By Not Awarding At Least Some Attorney’s Fees To Prevailing Plaintiff Under Clean Water Act Section 505(d)

 

Need for Permit and Small Civil Penalty Did Trigger Fee Recovery.

     Clean Water Act (CWA) section 505(d), 33 U.S.C. § 1365(d), allows a district court discretion to award attorney’s fees if two findings are made: (1) the free applicant was a prevailing or substantially prevailing party; and (2) a fee award is “appropriate.” Fees may not be appropriate where “special circumstances” are found. (Saint John’s Organic Farm v. Gem County Mosquito Abatement Dist., 574 F.3d 1054, 1058, 1063 (9th Cir. 2009).) The Ninth Circuit recently determined that a district judge misapplied the law regarding special circumstances to the facts of the particular case before it so that fee recovery should have been made to a prevailing plaintiff.

     In Resurrection Bay Conservation Alliance v. City of Seward, Case No. 10-35446 (9th Cir. May 19, 2011) (for publication), plaintiff nonprofit corporation prevailed against City of Seward when the district court found City was required to apply for a National Pollution Discharge Elimination System permit for certain discharges into Resurrection Bay and assessed a nominal civil penalty of $1 against City. However, the district court declined to permit briefing on recovery of fees and litigation costs. The Ninth Circuit, in a prior memorandum decision, remanded upon plaintiff’s appeal to have the district court decide whether an award of fees was proper under the CWA. On remand, the district judge found that plaintiff did prevail, but denied any fee award because it was not “appropriate”--plaintiff prevailed on only a small portion of the case because the EPA only decided one permit was necessary, there was a lack of evidence of actual pollution, and City did not change any preexisting behavior.

     The Ninth Circuit vacated the fee denial and remanded for some fees to be awarded to plaintiff.

     Because fee awards should be the rule rather than the exception and the special circumstances standard is interpreted quite strictly, Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 (1968) (per curiam), the Ninth Circuit could not see that “special circumstances” warranted a fee denial under the circumstances. Pollution is forbidden such that the CWA does not require for pollution to occur before allowing fee vindication through a citizens’ enforcement suit. As a result of the suit, City did change its behavior by having to submit to the permitting process for one of two locations. The insignificance of the victory was overshadowed by the salutary objectives of the CWA to restore and maintain the integrity of U.S. waters.

     Plaintiff sought to recover a total of $124,357.30 in fees and costs ($119,566.50 of that being fees). The federal appeals court remanded to have the district court determine the fee amount in the first instance. Nice turnaround win for plaintiff.

Special Fee Shifting Statute: Plaintiff Obtaining Document Compliance Under California Public Record Act Denied Fee Request Of Over $117,000

 

Document Disclosure Was Not Motivated By Records Request, Rules Fourth District, Division 3

     The California Public Records Act (PRA), Gov. Code, § 6250 et seq., has a mandatory fee shifting provision when a plaintiff prevails and compels disclosures of public records after initiating civil proceedings for injunctive or declaratory relief or mandate in court to enforce public record inspection or copying rights under PRA. (Gov. Code, § 6259(d).) However, Motorola Communication & Electronics, Inc. v. Department of General Services, 55 Cal.App.4th 1340, 1344-1346 (1997) established an important wrinkle for fee recovery in this area: the successful plaintiff must show that the litigation “motivated” the release of documents by defendant, which involves an examination of such factors as the timing of the disclosure in relation to the lawsuit commencement, whether the agency made a good faith effort to discover and disclose material, whether the scope of the request caused a disclosure delay, and whether the agency was burdened by other duties that delayed its response. Motorola was focal to the resolution of the next case we examine.

     In Hong v. Regents of the University of California, Case No. G043856 (4th Dist., Div. 3 May 18, 2011) (unpublished), two UCs voluntarily produced documents requested by plaintiff on certain grants but at least some documents were not produced based on confidentiality concerns and the fact that only one employee was working on gathering responsive documents. Plaintiff filed the PRA suit, and the documents were released. However, the record showed that the documents were disclosed based on two factors: (1) a change in circumstances--the partners involved in the grant changed course such that confidentiality considerations evaporated; and (2) more time was needed to produce the documents because only one employee was charged with assembling the responsive documents. Plaintiff sought $430 in filing/motion fees and over $117,000 in attorney’s fees. The trial court denied the fee request on two grounds.  An appeal followed.

Civil Rights: Nonprevailing Plaintiff in Unruh Act, DPA, And ADA Lawsuit Was Properly Not Hit With Adverse Fee Award

 

ADA Frivolousness Was Only Fee Basis, Which Was Not Established.

     Handicapped plaintiff in Pike v. Fillmore & Western Railway, Inc., Case No. B225578 (2d Dist., Div. 6 May 17, 2011) (unpublished) dodged a fee exposure bullet after not prevailing in a lawsuit brought under California’s Unruh Civil Rights Act, the California Disabled Persons Act (DPA), and the American with Disabilities Act of 1990 (ADA). Defendant moved for fee recovery, but was rebuffed at the lower court level. This prompted an appeal of the fee denial.

Class Actions: Class Member Not Arguing Constructive Common Fund Has No Standing To Challenge Fee Recovery Paid By Settling Defendant

 

Ninth Circuit So Rules In Recent Decision.

     In Glasser v. Volkswagen of America, Inc., Case No. 09-56618 (9th Cir. May 17, 2011) (for publication), VW settled with plaintiff in a class action after it consented to new disclosures relating to its smart-key replacement technology (but paid no money to the class), agreeing nevertheless to negotiate fees and costs but not contesting that Plaintiff prevailed and that his attorneys were entitled to something. VW agreed to pay fees and costs awarded by the court, which eventually did award fees of $417,663.73 and costs/expenses of $16,614.40. An objecting class member whose objections were overruled appealed the fee award.

     The Ninth Circuit here found that objecting class member lacked standing such that his appeal should be dismissed. Where fees are paid by the defendant rather than out of a common fund, the only basis to allow standing to an objecting class member is on a “constructive common fund” theory--namely, the claim that class counsel breached their fiduciary duty to the class by agreeing to an unfair settlement. Objector was not relying on this theory, but on an attenuated injury theory that was easily rejected by the appeals court.

1949 VW with split-rear window.  Source:  Wikipedia.

Judgment Enforcement: Attorney’s Fees Not Authorized For Prevailing In Independent Creditor’s Suit

Reversal of Fortune, With Appellate Court Reversing $1,492,643.71 Fees Award.

     In an interesting dispute over moneys contractually owed for home video distribution of the Steven Seagal movie “The Patriot,”

a judgment creditor won an independent creditor’s suit under Code of Civil Procedure section 708.210 et seq., with the lower court also awarding $1,492,643.71 in attorney’s fees to judgment creditor pursuant to section 701.020(c).

     The Second District, Division 1, in a 3-0 unanimous decision on the fees issue, reversed in Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc., Case No. B208839 (2d Dist., Div. 1 May 13, 2011) (certified for partial publication; fees award discussion published).

     Justice Chaney, writing for the reviewing court, found that no fees are authorized for recovery under the independent creditor’s suit scheme. The discretionary fee-shifting provision relied on by the trial court--section 701.020(c)--concerns procedures for enforcement of judgments by writs of execution, rather than use of the independent creditor’s suit procedure.

     Big reversal of fortune on the fee front for judgment creditor in this one.

In The News . . . . City Of Roseville Settles Anti-Gay Civil Rights Police Lawsuit For $490,000

 

However, They Spent About $463,000 On Fees And Related Defense Costs.

     Just to confirm the high price of litigating these days, here is one about a recent settlement reached in a civil rights case brought against the City of Roseville.

     Roseville has agreed to pay $490,000 to settle an anti-gay civil rights lawsuit brought by three police officers alleging that police management fostered a hostile work environment against them.

     What was the price tag of this settlement beyond the payout? According to Jon Brines in a May 13, 2011 post at granitebaypt.com, City spent about $463,000 to defend itself, broken down this way: $413,000 for attorney’s fees, $31,000 for an investigative report, and $19,000 for an information technology staffer to gather emails and other e-documents during the progress of the case.

In The News . . . . District Court Gives Preliminary Approval To Black Farmers’ Class Action Discrimination Settlement

 

September 1 Hearing Will Consider Fairness of Settlement and Fee Requests.

     In a February 24, 2010 “In the News” post, we reported on a pending $1.25 billion settlement involving allegations of discrimination against black farmers by the U.S. Department of Agriculture.

     We can now report that U.S. District Judge Paul Friedman (of the District of Columbia) has given preliminary approval of this settlement on Friday, May 13, 2011.

     Next up is a September 1, 2011 hearing to consider two things: the fairness of the settlement and the fee requests of plaintiffs’ attorneys. They are requesting fee awards of between 4.1-7.4% of the $1.25 billion settlement fund or, if translated into dollars, an award somewhere within the range of $51-92.5 million.

Common Fund/Multipliers: Recent Vioxx Products Liability Decision Has “Must Reading” Discussion of Common Fund Theory

 

Case Discusses It in Class Action and MDL Complex Litigation Contexts, Also Indicating Perdue Decision Did Not Apply to Using Lodestar as Check on Percentage of Recovery Fee Award.

     For those practitioners dealing with cases where a common fund is created (from which fee awards are frequently sought), we came across a case that is must reading. It is In re Vioxx Products Liability Litig., __ F.Supp.2d __, 2010 WL 5576193 (E.D.La. Oct. 19, 2010), authored by U.S. District Judge Eldon E. Fallon.

     Aside from having a very scholarly discussion of the reasons behind the common fund doctrine, Vioxx was interesting in that it involved the settlement of astronomical litigation where over $4.3 billion was funded and distributed to numerous claimants within 31 months. District Judge Fallon found that the common fund doctrine had been creatively used to assess common benefit fees in favor of attorneys who render legal services beneficial to all MDL plaintiffs, even though they only represented a small segment of the plaintiffs directly.

     Eventually, the district court adopted a “blended” percentage method to determine a reasonable fee award, determining first the valuation of the benefit received by claimants, then selecting a benchmark percentage, and finally adjusting upwards/downwards through a multiplier process. District Judge Fallon determined that 6% of the settlement amount was a reasonable benchmark for a common benefit fee award, but coming out of the contingent fee recoveries of all Vioxx primary plaintiffs’ attorneys. However, the district court then adjusted this percentage upward by .5% to a total of 6.5%.

     Lastly, the district court used a lodestar “check” on the reasonableness of the common fund award. The common benefit fee award came to $315,250,000, not bad at all. In a footnote, District Judge Fallon dismissed that Perdue v. Kenny A., 130 S.Ct. 1662 (2010) impacted using the lodestar as a cross-check of a common benefit awarded as a percentage of a common fund, finding that “[t]he Supreme Court’s holding was informed by the Supreme Court’s lodestar jurisprudence and the statutory purpose of [42 U.S.C.] § 1988.” Id. at *17 n. 25.

Civil Rights/Retainer Agreements: Section 1988 Fee Recovery Right Cannot Be Assigned By Litigant/Client To Attorney

 

Ninth Circuit So Held in Pony.

     A recent memorandum decision in a Ninth Circuit case reminds all of you civil rights practitioner of an important caveat: clients own the rights to fees under federal civil rights cases such that they cannot be assigned to their attorneys. However, attorney’s lien rights might lead to a different result.

     In Benas v. Baca, Case No. 09-56561 (9th Cir. May 11, 2011) (unpublished memorandum decision), Yagman & Yagman & Reichmann, who represented a plaintiff in a 42 U.S.C. § 1983 federal civil rights action, had a retainer agreement providing that plaintiff irrevocably assigned her right to any fee award to the attorneys. Later, after plaintiff filed for bankruptcy protection, the bankruptcy trustee and defendants settled for $35,000 in return for a full release/with prejudice dismissal of the lawsuit. Trustee moved to dismiss the action, while YYR moved for an award of § 1988 fees based on the retainer agreement assignment provision.

     The district judge denied YRR’s motion for fees based on Pony v. County of Los Angeles, 433 F.3d 1138, 1140 (9th Cir.), cert. den. sub nom., 547 U.S. 1193 (2006), which held that a plaintiff may not assign her right to seek attorney’s fees.

     YYR’s appeal argued that Pony was wrongly decided, but this challenge did not get much traction because only an en banc panel can overturn an existing Ninth Circuit decision. YYR also argued that its situation was distinguishable because plaintiff joined the attorneys’ fee request. However, this argument was rejected because the trustee was the owner of the claim such that plaintiff had no interest in the outcome. Afffirmed.

     BLOG UNDERVIEW--We wonder why attorneys did not insist on an attorney’s lien in the retainer agreement, which might have been binding on the trustee if validly created.

Section 998: $70,215 Costs Award Affirmed Because CCP § 998 Offer Was Reasonable

No Procedural or Substantive Infirmities in Plaintiff’s Rejected 998 Offer.

     In Ganson v. Ayoub, Case No. B223504 (2d Dist., Div. 5 May 13, 2011) (unpublished), plaintiff motorcyclist sued car driver and car owner for injuries occurring as a result of being struck by the car. Plaintiff offered to settle through a 998 offer of $499,999.99 through identical offers to each defendant, which was sent to defendants’ lead counsel but not their newly-associated counsel. The 998 offers expired without acceptance, and the jury awarded plaintiff total damages of $549,198. After dueling costs memoranda were filed, the trial court awarded plaintiff $70,215 in costs. Defendants appealed.

Section 998: Unsuccessful Will Contestant’s Rejection Of 998 Offer Means She Had To Pay $4,790 In Expert Witness Trial Preparation Expenses

 

$10,000 Offer Not Token Where Pretrial Investigation Showed No Basis to Invalidate Will in “All or Nothing” Case.

     CCP § 998 offers do not have to be substantial to survive a “good faith” test. If the offeror does adequate pretrial investigation in an “all or nothing” case, even fairly small offers will be found to be non-token in nature and will give rise to costs exposure. That happened in the next decision we look at.

     In Estate of Fuller, Case No. C063407 (3d Dist. May 11, 2011) (unpublished), will contestant, in an “all or nothing” battle in which the stakes ranged from the opponents receiving a substantial estate or nothing at all, eventually lost on a summary judgment motion which was affirmed on appeal in favor of the opponents supporting the will. Winning opponents, who were more successful than their $10,000 998 offer, then sought to recover certain costs, including $4,790 in expert witness trial preparation expenses. These were awarded, with the will contestant also appealing the costs award.

Happy Third Birthday To Our Blog--We Can’t Believe It.

 

     Just a quick post to remind ourselves that this is our third “birthday” in doing this blawg. We can hardly believe it; how time flies since our inaugural post on May 11, 2008. We hope it has been useful to you readers out there, and we thank you all for some very excellent interactive feedback over the last three years.

       Laddie Boy with his birthday cake on the White House grounds.  1922.

SLAPP: Trope Limitation Prevents Winning Law Firm And Its Partners From Recouping Fees Spent In Successful Appeal

 

Use of Associate For Appellate Work Was Tantamount to “Lost Opportunity Costs” Not Allowable under Trope.

     We have done numerous posts on the Trope limitation which prevents in pro per attorneys representing themselves from obtaining attorney’s fees recovery under various fee-shifting statutes or contractual clauses. Now, Justice Mosk of the Second District, Division 5 has penned an opinion reviewing Trope-inspired jurisprudence and concluded on behalf of a 3-0 panel that an associate working for a law firm/its partners is disqualified from seeking fee recovery on the attorneys’ behalf.

     Carpenter & Zuckerman v. Cohen, Case No. B215544 (2d Dist., Div. 5 May 10, 2011) (certified for publication) involved a situation where cross-defendants (a law firm and two individual partners) won a SLAPP motion against a cross-complaint filed by former clients and then obtained dismissal of the ensuing appeal as being untimely in nature. Winning attorneys had used an associate in the firm to do the appellate work under an independent contingency arrangement. They then requested recovery of $33,168.75 in attorney’s fees for the appellate win. The trial court refused to make the award, reasoning that the associate’s work fell within the Trope limitation. Disappointed law firm and its partners appealed.

Co-Contributor Mike Hensley to Speak at 2011 NALFA Attorney Fee Conference

 

The Conference is June 16, 2011, Noon to 5 p.m., at Southwestern School of Law

     The National Association of Legal Fee Analysis (NALFA) holds its annual conference this year at Southwestern School of Law in Los Angeles.  Blawg co-contributor and co-creator Mike Hensley will be one of the speakers, participating in a panel on attorney fees in prevailing party litigation with the Hon. Jay C. Gandhi, and attorney Joseph P. Wohrle.

     For a complete conference agenda, for registration, or both, click here.

Trade Secrets: Orange County Superior Court Awards $484,943.46 In Fees/Costs To Prevailing Defendants In Trade Secrets Case

 

Only About 10% Reduction Made by Superior Court Judge Charles Margines.

     Hat Tip to Howard M. Fields, Senior Counsel with Miller, LLP in Los Angeles, who brought the next case to our attention. He obtained a great result for his firm’s clients in a recent trade secrets case that was voluntarily dismissed without prejudice. A substantial fee/costs award was the award for the work on this case.

     In SASCO v. Rosendin Electric, Inc., Orange County Superior Court Case No. 30-2008-00110031-CU-BC-CJC, plaintiff SASCO sued defendant competitor Rosendin Electric and several individual defendants (who else but former employees of SASCO) primarily for trade secret misappropriation. The problem, if you lose, is that the Uniform Trade Secrets Act has an attorney’s fees shifting provision (Civ. Code, § 3426.4) which applies if a trade secret misappropriation claim is made in bad faith, requiring satisfaction of both objective and subjective prongs on this issue. (Gemini Aluminum Corp. v. California Custom Shapes, Inc., 95 Cal.App.4th 1249, 1261 (2002).)

     The fee-shifting statute was satisfied in this case, because there was evidence showing that (1) SASCO never had any competent evidence of trade secret misappropriation (with even plaintiff’s CEO admitting this), simply relying on uncorroborated beliefs; (2) SASCO’s main injury--a lost bid--could not be sustained because it lost the bid due to a highly inflated bid rejected by the bid proponent; (3) plaintiff never opposed a defense summary judgment on the claim, waiting at the last minute to dismiss after trying for a last-gasp settlement; (4) plaintiff had attempted to deprive individual defendants of ERISA benefits in a federal court case, but met defeat in a manner that resulted in a $568,573.32 (1.5 multiplier) fee award against SASCO there; and (5) there was proof from which an anticompetitive motive could be tacked on plaintiff, which can satisfy the objective bad faith prong (FLIR Systems, Inc. v. Parrish, 174 Cal.App.4th 1270, 1276 (2009)).

     In finding defendants were the prevailing parties, Orange County Superior Court Judge Charles Margines used a “practical” approach in finding that defendants prevailed. He applied the lodestar method for determining fee reasonableness, but discounted the requested amounts by 10% for work on non-trade secret claims (although most were intertwined) and excluded 15 hours for time spent on fee reply motion work. Even with that, the cumulative award to defendants was substantial--$474,336 in fees and $10,607.46 in costs, for a grand total of $484,943.46.

     For those of you wanting to read the very detailed, scholarly April 27, 2011 minute order ruling in this case, here it is. We also have more cases in this substantive area under our “Trade Secrets” home page category.

Federal Sanctions: Gregory P. Joseph Writes Informative Article On Inherent Power Of The Court Sanctions Issues In The Federal Judicial Arena

Inherent Power of the Court Sanctions Reach a Broad Spectrum of Conduct, As Shown in the Article.

     Gregory P. Joseph, a New York City attorney, has written an article, “Developments in the Federal Law of Sanctions,” which has been published in the April 12, 2011 edition of The United States Law Week. It explores evolving issues of interest with respect to federal sanctions. Here is a summary of what is discussed in this informative article:

     *Whether inherent power of the court sanctions extend to administrative tribunal abuse unless the abuse bears a sufficient nexus to the federal court proceedings (FDIC v. MAXXAM Inc., 523 F.3d 566, 591, 593 (5th Cir. 2008) [no]; Children’s Ctr. for Devel. Enrichment v. Machle, 612 F.3d 518 (6th Cir. 2010) [no]; Wachovia Bank v. Tien, 2010 U.S.App. LEXIS 26089 at *13-*14 (11th Cir. Dec. 22, 2010) [yes]; Carr v. Tillery, 591 F.3d 909 (7th Cir. 2010) [yes]).

     *Whether an offender’s inability to pay is a legitimate consideration for § 1927 sanction imposition, with two appellate courts concluding it is not (Shales v. General Chauffeurs Sales Drivers & Helpers Local Union No. 330, 557 F.3d 746 (7th Cir. 2009); Hamilton v. Voise Cascade Express, 519 F.3d 1197 (10th Cir. 2008); Roth v. Spruell, 388 F.App’x 830 (10th Cir. 2010).)

     *Whether there is viarious liability on the part of a law firm for § 1927 violations (BDT Prods. Inc. v. Lexmark Int’l Inc., 602 F.3d 742 (6th Cir. 2010) [no]; FM Indus. Inc. v. Citicorp Credit Servs., 614 F.3d 335 (7th Cir. 2010) [no].)

     *Whether there is vicarious law firm liability where sanctions are imposed under the inherent power of the court (Lockary v. Kayfetz, 974 F.2d 1166, 1170 (9th Cir. 1992) [yes]; Mroz v. Mroz, 65 F.3d 1567, 1576 (11th Cir. 1995) [yes]; Wolters Kluwer Fin. Servs. v. Scivantage, 564 F.3d 110, 114 (2d Cir. 2009) [no, unless independent evidence of law firm’s bad faith].)

     *Whether inherent power sanctions of the court can be extended to arbitration misconduct (Positive Software Solutions, Inc. v. New Century Mortgage Corp., 619 F.3d 458 (5th Cir. 2010) [no]; but see First Auto. Ser. Corp. v. First Colonial Ins. Co., 2010 U.S. Dist. LEXIS 66974 (M.D. Fla. June 16, 2010) [arbitrators can award bad faith litigation sanctions].)

     *Whether FRCP 30(d)(2) attorney’s fees sanctions can be awarded against clients and/or their counsel for egregious deposition behavior (Craig v. St. Anthony’s Med. Ctr., 384 F.App’x 531 (8th Cir. 2010) [yes; attorney]; GMAC Bank v. HTFC Corp., 248 F.R.D. 182, 197, 198 n.22 (E.D. Pa. 2008) [yes; passive acquiescence by client; 30(d)(2) sanctions levied against both lawyer and client].)

Fees Clause Interpretation: Does Clause Mandating Award Of “Actual Costs And Expenses” To Prevailing Party Mean Actual Or Reasonable Fees?

Second District, Division 2 Answers the Question Under Civil Code Section 1717.

     We have seen numerous contracts that have attorney’s fees clauses that read something like this: “In any action between the parties arising out of or in relation to this Agreement, including any collection attempts should Payment not be timely made, the prevailing party in such action will be awarded his or her actual costs and expenses, including actual attorneys’ fees.” Does this really sanction an award of actual versus reasonable fees to a prevailing party?

     The Second District, Division 2 answered this question in a recent unpublished decision, Kleefeld v. Marrero, Case No B224011 (2d Dist., Div. 2 May 5, 2011) (unpublished).

Arbitration/Prevailing Party: Client’s Efforts In Compelling Contractual Arbitration Under Arbitration-Bearing Fee Clause Gives Rise To Fee Recovery

 

Appellate Court So Holds in Prior Case After a Rehearing.

     In a prior post on October 13, 2010, we reviewed the case of Benjamin, Weill & Mazer v. Kors, Case No. A125732 (1st Dist., Div. 2), which was published but then erased from the books after the appellate court granted a rehearing on its own motion on October 26, 2010. Now, the same case has been republished, following rehearing, on May 5, 2011. No change in result, but another section added on an attorney’s fees issue.