CALIFORNIA ATTORNEY'S FEES

Continuing Education: MCLE Available For NALFA’s 2011 Attorney Fee Conference

 

Co-Contributor Mike Participates on a Panel at this Conference.

     Although it was supposed to be held earlier in the year, the National Association of Legal Fee Analysis (NALFA) is holding its 2011 Attorney Fee Conference at Loyola Law School on November 17, 2011 between noon-5 p.m. You can gain MCLE credit if you attend, with more details available on NALFA’s website.

     Co-contributor Mike will be on a panel with U.S. Magistrate Judge Jay C. Gandhi (C.D.Cal.) and Davis H. Paige of Sterling Analytics Group. This particular panel deals with “Court Awarded Attroney Fees in Prevailing Party Litigation,” although there will be panels on class action, insurance, and other issues of interest in the attorney’s fees area.

Multipliers: New Jersey Supreme Court Hears Oral Argument On Impact Of Federal Perdue v. Kenny A. Decision On Fee Enhancements In State Cases

 

October 25, 2011 Oral Argument Heard on Walker and Humphries Cases.

     In our May 30, 2011 post, we discussed Walker v. Giuffre, a New Jersey appellate division decision which disallowed a 45% fee enhancement in a state consumer fraud case based on the perceived more rigorous analysis applied to multipliers by the U.S. Supreme Court in Perdue v. Kenny A, 130 S.Ct. 1662, 1669 (2010).

     Incidentally, the New Jersey Supreme Court on April 14, 2011 certified for review the companion case of Humphries v. Power Mills Shopping Plaza, N.J.App.Div. Docket No. A-6038-08T1 (Nov. 4, 2010 unpublished), which disallowed a 20% fee enhancement in an ADA/New Jersey disability discrimination case based on Perdue.

     We can now report that both Walker and Humphries were argued before the New Jersey Supreme Court on October 25, 2011, so stay tuned for future developments.

Reasonableness Of Fees: $168,508.75 Fee Award Was Not Reasonable In Amount, Where Time Records Showed No Apportionment Out Of Time Spent On Parallel, But Legally Unrelated, Action By Attorney Representing Winning Defendant

 

     Here is one demonstrating that appellate courts do not blindly rubber stamp trial court fee awards, simply because a side did prevail. Especially so, when there are multiple lawsuits being litigated and the winning attorney did not clearly apportion out work spent on a parallel, but legally unrelated, action involving the same clients.

     Grubb & Ellis v. nXa, LLC, Case No. B225096 (2d Dist., Div. 8 Oct. 28, 2011) (unpublished) is a situation where defendant won summary judgment against G&E for allegations that defendant breached a real estate listing agreement. (Defendant also lost some cross-claims against G&E.) The trial court awarded defendant $168,508.75 in attorney’s fees to defendant for defending against G&E’s action out of a requested $210,000 in fees.

     On appeal, the amount of the fee award was reversed as being unreasonable.

     The appellate court did not dispute fee entitlement because, after all, defendant did beat the contractual commissions claim having a fees clause in effect. Defendant prevailed, even though it lost the cross-claims and the lower court did retain discretion to decide which side prevailed.

     However, the fee award amount is what troubled the appellate court. The defense attorney failed to apportion fees between this case and a parallel fraud action involving claims that were not legally (but only historically) related. The time entries in the supporting fee motion papers were so vague that even the appellate court could not sort it out. The Second District found it was unfair for defendant, under the circumstances, to recover “each and every dollar it has paid to its attorneys, for whatever cases . . . .” The case was remanded for a more measured fee determination.

     BLOG UNDERVIEW--The result underscores what Justice Fybel of the Fourth District, Division 3 said at a fee seminar in Los Angeles last year--litigants need to provide a “roadmap” for the appellate court on attorney’s fees issues, something which may require apportionment of work on noncompensable claims or exclusion of work not really related to the case where fees were indeed awarded.

Prevailing Party: Plaintiff Winning $1 Nominal Damages On One Claim, But Losing The Primary $320,805 Claim, Did Not Prevail Or Prevent Fee Recovery By Opponent

 

Opponent’s Fee Award of $40,588 Affirmed On Appeal.

     Here is a pragmatic opinion that shows the “prevailing party” determination under Civil Code section 1717 is meant also to be pragmatic as far as the adjudicatory process is concerned. The decision is Brighton Collectibles, Inc. v. S&J Shoes, Inc., Case Nos. B224310/B226866 (2d Dist., Div. 1 Oct. 28, 2011) (unpublished) and is authored by Presiding Justice Mallano.

     The case involved a plaintiff who lost a trademark license agreement dispute with defendants where it argued defendants had to keep a retail store open for the full term and breached the agreement by closing early, seeking damages at trial of $320,805. However, plaintiff was awarded nominal damages of $1 for defendants’ failure to turn over a customer list.

     Defendants moved for fees, but plaintiff claimed it prevailed (by winning $1) or that there was no prevailing party. The trial court awarded the defense $40,568 in fees and $2,807.67 in costs, prompting an appeal by plaintiff.

     Plaintiff lost. Here, the fee award was discretionary because neither party had an unqualified victory. But, pretty close, said the appellate panel. Plaintiff’s $1 award did not outweigh that the defense did achieve its primary litigation objectives of prevailing on the $320,805 trademark license contract claim. Under the circumstances, no abuse to give the fee recovery to the defense (the side that pragmatically won).

In The News . . . . Newspaper Copyright Infringer Filer Righthaven, LLC Hit With Approximate $120,000 Fee Award in Case Against Thomas DiBiase

Rough Weather:  No Safe Haven for Righthaven in Legal Shit Storms.

     In our September 30, 2011 post, we talked about Righthaven, LLC of Las Vegas, which is a newspaper copyright infringer filer that files suits against persons for using stories or photographs published in certain papers.

     Well, it was recently ordered to pay $119,488 in attorney’s fees and costs in its failed lawsuit against former federal prosecutor Thomas DiBiase. The fees were awarded under the federal Copyright Act.

     Earlier, Righthaven was hit with a $34,045 fee award, but the current one was much, much larger--even though Righthaven has said it is having problems bonding or coming to terms with the much smaller previous award.

     For more on Righthaven and this award, see Steve Green’s October 26, 2011 post on the Las Vegas Sun.

Two-Fer: Special Fee Shifting Statute/Section 1717 Unpublished Cases

 

Construction Lender Gets Fees For Successfully Defending Bonded Stop Notice Claim.

     In North County Acoustics, Inc. v. Bank of America, N.A., Case No. D057720 (4th Dist., Div. 1 Oct. 27, 2011) (unpublished), subcontractor was hit with an adverse attorney’s fees award of $42,455.05 after losing a stop notice contest with a construction lender after lender obtained summary adjudication on the ground that the stop notice was not adequately bonded. Civil Code section 3174 does allow attorney’s fees to a prevailing party in a bonded stop notice action. The appellate court affirmed the fee award, which was made after a 20% reduction in the request for fees by the trial court, because lender did win on the stop notice claim and lender’s settlement of a related mechanic’s lien claim did not impact the fee award.

“Of Counsel” Attorney Independently Obligated to Winning Probate Attorney Entitled to Fee Recovery

     Dzwonkowski v. Spinella, Case No. G044336 (4th Dist., Div. 3 Oct. 27, 2011) (unpublished) was a situation where a client in a probate matter was sued for nonpayment of probate attorney’s fees by an “of counsel” attorney who had an independent office near probate attorney’s practice. Probate attorney won after a fee arbitration where he was represented by “of counsel,” with the trial court also awarding post-arbitration fees of $16,344.41. Disgruntled client appealed, raising the Trope bar. However, because the probate attorney had an independent contractual obligation to pay “of counsel” for his work no matter what, the post-arbitration fees were fully collectible. “Of counsel” was independent of probate attorney who had a separate contractual obligation to “of counsel” to pay for his work, so that the holding in Farmers Ins. Exch. v. Law Offices of Conrado Sayas, 250 F.3d 1234 (9th Cir. 2001) was more appropriate in allowing fees based upon such a separate relationship (as opposed to Trope). Justice Fybel of our local appellate court penned the 3-0 panel decision in Spinella.

Special Fee Shifting Statute: Municipal Ordinance Fee Shifting Provision Resulted In $202,144.17 Fee Award To Winning Adjoining Neighbors In Tree Obstruction View Dispute

 

Oakland Municipal Ordinance Did Justify Fee Award to Winners.

     This one is a case that could have fallen under our category “Homeowners Association,” although it involved adjoining neighbors who got into a fight over trees obstructing a view corridor to the San Francisco Bay (as contrasted to homeowners versus a homeowners association controversy as to views). However, the losers--even after appeal--were liable to pay $202,144.17 in their opponents’ fees.

     Bishop v. Hanes, Case Nos. A129018/A130062 (1st Dist., Div. 1 Oct. 27, 2011) (unpublished) was a lengthy battle where adjoining neighbors, at first cooperative, got into acrimonious litigation over acacia trees    disrupting plaintiffs’ views to the San Francisco Bay. In a prior litigation, plaintiffs lost their bid to obtain relief based on a 1964 view agreement with different parties and under an Oakland View Ordinance which was more narrowly written. Not to be derailed, plaintiffs successfully lobbied to have the Oakland City Council clarify the scope of the View Ordinance in their favor. That led to suit number two, where plaintiffs did prevail against defendants neighbors (who actually moved and rented out the property to tenants) by obtaining court-ordered injunctive relief to remove view corridor obstructing vegetation and to replace the offensive plants with view nonintrusive vegetation. (Defendants apparently lost a creative argument that “birds might enjoy the trees at issue” when attempting to shore up their position.) However, relevant to our blog here, plaintiffs were awarded $202,144.17 in attorney’s fees as prevailing parties under an Oakland ordinance mandating fees to a party prevailing in a controverted view action which was “resolved after trial or judicial arbitration in municipal or Superior Court.”

     The fee award was affirmed. Defendants did not dispute entitlement under the Oakland ordinance or the reasonableness of the fees awarded. Result? Sustain, sustain.

Section 1717: Discrete Claims Adjudged In Defendant’s Favor Gave Rise To Fee Exposure To Voluntary Dismissal By Plaintiff Of Suit After Adjudication

 

Fifth District Rules in a “Novel Situation for the Application” of Section 1717.

     This next one is sure to engender some further jurisprudence in the Civil Code section 1717 area, with the appellate court acknowledging it presented “a novel situation for the application of section 1717.”

     CDF Firefighters v. Maldonado, Case No. F061183 (Oct. 26, 2011) (certified for publication) involved a situation where a defendant union member invalidated a $22,789.96 fine levied by plaintiff labor union after six years of litigation and a defendant win upon a partial judgment on the pleadings. However, the trial court denied the motion for judgment on the pleadings as to a $743 fine, with plaintiff dismissing the complaint with prejudice on the entire complaint against defendant afterwards.

     What happened next?

In The News . . . . Environmental Lawyer Marco Gonzalez Seeks $756,132 In Fees From City Of San Diego In Fireworks Pollution Suit

     As reported by Mike Lee in an October 20, 2011 post on SignOnSanDiego.com, environmental lawyer Marco Gonzalez recently filed a motion with the San Diego County Superior Court to be awarded $756,132 in attorney’s fees by the City of San Diego for winning a CEQA lawsuit over the fireworks-related pollution of last summer’s July 4th fireworks.

     The basis for the fee claim is California’s private attorney general statute, which allows attorneys to obtain fees for vindicating public interest issues under certain circumstances.

     The City will be opposing the fee request at a November 18, 2011 hearing, claiming that the request is unreasonable.

     Opponents see this as a shakedown request, while others believe that taking away fee recovery in CEQA suits would “essentially take away the enforcement” altogether. (Apparently, a 2.0 multiplier is being requested in this dispute, so it should be interesting no matter which side you take.)

Settlement: Oral/Written Settlement Agreement Enforced, But Not Add-On Fees Clause

 

$11,143,50 Fee Award to Defense for Enforcing Settlement Not Allowed.

     We all know by now that almost all state laws, including California, have a strong policy to promote settlement. After all, the court system would be overstressed and could not function if everything was tried (especially in these times of fiscal pressures). The next case illustrates this principle, but also adds an important wrinkle: add-on terms not agreed to by the parties and resultant fee awards from such terms will not be enforced unless it was an unmistakable component of the bargain between the litigants.

     In Nussbaum v. Corlyn, Case No. B222102 (2d Dist., Div. 2 Oct. 25, 2011) (unpublished), plaintiffs won a default judgment in a real estate fraud action and then filed a follow-up fraudulent conveyance lawsuit against the defendants. On the eve of trial, the parties reached a settlement that was put on the court record under Code of Civil Procedure section 664.6. At the end of the settlement, plaintiffs’ counsel requested that the parties agree that attorney’s fees be allowed to parties enforcing the settlement, with counsel for one of the defendants so agreeing but no one else consenting to this add-on term.

     Defendants circulated and signed a written settlement agreement prepared by some of the defendants, but plaintiffs refused to sign. Defendants moved to enforce the settlement, which was successful, and the trial court also awarded defendants $11,143.50 in attorney’s fees to enforce the settlement against plaintiffs.

     The appellate court affirmed the motion to enforce the settlement, but reversed the fee award.

     The fee award reversal was grounded on two primary facts: (1) the settling parties never individually consented to the fee award; and (2) two of the defense counsel rejected the add-on term outright. Under the circumstances, it could not be said that fee recovery was expressly agreed to by all of the settling parties.

Employment/Cases Under Review: First District, Division 3 Reverses Fee Award Against Employee

 

Issue is KIrby/UPS Labor Code sections 218.5 and 1194 Interplay.

     Two cases--Kirby v. Immoos Fire Protection, Inc. and United Parcel Service Wage & Hour Cases (McGann)--are currently pending before the California Supreme Court. They discuss the issue of whether a prevailing employer may be awarded attorney’s fees under Labor Code section 218.5 (which allows fees to a prevailing party in wage/hour/benefit disputes) when the plaintiff joins in a single complaint a claim under Labor Code section 1194 (overtime compensation fee shifting provision which is unilateral only in favor of employee) as well as other causes of action (one arguably outside section 1194). Kirby said no complete bar to employers obtaining fees as to meal/rest period losing claims, while UPS agreed there was no complete bar but held that missed meal/rest claims do not trigger the reciprocal section 218.5 fee recovery provisions.

     In our September 28, 2011 post, we discussed UPS Wage & Hour Cases (Salicido), an unpublished Second District decision that followed the lead of McGann notwithstanding supreme court review.

     Now, the First District, Divsion 3 in Zelasko-Barrett v. Brayton-Purcell, LLP, Case No. 131601 (1st Dist., Div. 3 Oct. 24, 2011) (unpublished) chimed in, finding section 1194 is not a complete bar to an award of fees in an action that includes both nonpayment of overtime wages under section 1194 and any other claims. However, it reversed a $120,000 fee award in favor of employer and against employee because employee’s various claims rested on the theory that he was not exempt such that each claim was primarily based on the wrongful withholding of overtime compensation. (Accord, Lopez v. U.P.S., 2010 U.S. Dist. LEXIS 136352 at *4 (N.D.Cal. 2010).)

SLAPP: $92,898 Fee Recovery Not Time Barred And Not Excessive

 

$16,000 Deduction for Unnecessary Collaboration Showed No Abuse of Discretion.

     McCoy v. Walczak, Case No. A129671 (1st Dist., Div. 4 Oct. 21, 2011) (unpublished) involved a situation where a trial court denied a timely filed fee motion by a winning SLAPP defendant in a defamation suit “without prejudice,” but later awarded $92,898 to two sets of attorneys when the motion was filed soon after the first ruling. Losing plaintiff was miffed, and appealed.

     Result?

Reasonableness Of Fees: Work Of Second Attorney Affiliating Closer To Trial Properly Discounted From Fee Award

 

Trial Court Discretion Is Broad on this Issue.

     Viney v. Grupp, Case Nos. A120208/120993 (1st Dist., Div. 4 Oct. 19, 2011) (unpublished) is a convoluted real property easement interference case--involving landlocked property--where one $240,000 fee award went POOF! based on a partial reversal of a damages issue (and appellate instructions that there might be entitlement and no need to apportion with respect to the other side’s gripe about not getting any fees should they win below on remand) and where another fee of award of under $168,000 was affirmed based on a settlement agreement fee clause.

     The real lesson we took away from this case involved the prevailing party who won the $168,000 fee award. He appealed the trial court’s reductions of about $68,000 from the requested fees, primarily for the second attorney who affiliated into the case close to trial. The trial court found that second counsel was not needed and did not improve the client’s representation, with the appellate court finding that this was no abuse of discretion given the broad discretion imbued with the lower court to make such a determination.

POOF!: $260,000 PRIVATE ATTORNEY GENERAL FEES AWARD GOES AWAY WITH PARTIAL REVERSAL OF MANDATE PETITION

 

     The appellate court’s recent decision in Ross v. California Coastal Commission, Case No. B228624 (2d Dist., Div. 5 Oct. 20, 2011) (unpublished) demonstrates our POOF! principle in convincing fashion. There, the appellate court reversed a mandate petition in part which was favorable to plaintiffs. That reversal meant that the $260,000 fees award to plaintiffs under California’s private attorney general statute, too, went POOF! (Gillan v. City of San Marino, 147 Cal.App.4th 1033, 1053 (2007).)

Homeowner Associations: Substantial $306,464.63 Fee Award To Some Prevailing Defendants And $236,976 Fee Award To HOA Sustained By Appellate Court

 

Actions Involved Enforcement of CC&Rs, With Trial Court Reasonably Awarding a Lodestar Amount After Reductions.

     Yet again, we have a homeowner-HOA dispute resulting in substantial fee awards against a homeowner and in favor of two set of defendants. Seltzer v. Eugene Burger Management Assn., Case No. A128552 (1st Dist., Div. 3 Oct. 19, 2011) (unpublished) provides a warning to liitgants in homeowner-HOA disputes that clear prevailing parties will obtain fees, and they can be substantial (and crippling) in nature--resulting in financial ruin for homeowners and resulting in increased assessments for losing HOAs.

     Basically, homeowner sued for CC&R violations, and HOA cross-complained for delinquent assessments and homeowner’s violation of unauthorized building modifications. Homeowner lost against non-HOA/HOA defendants, and HOA won over $50,000 for unpaid homeowner assessments. Subsequently, the lower court awarded $304,464.63 in fees to defendants and HOA $236,976 in attorney’s fees under Civil Code section 1354 (which allows for fee shifting to the prevailing party in a suit to enforce CC&Rs).  An appeal followed

Homeowner Associations: $55,034 In Attorney’s Fees To HOA Affirmed On Appeal

 

Justice Bedsworth, Always Colorful, Pens this Colorful Homeowner-HOA Decision Over No Less Than Tree Trimming to Preserve Ocean Views.

     Okay, in Orange County, litigators of homeowner-HOA disputes see a lot of disputes involving homeowners who do not want to trim trees and HOAs which want them trimmed to preserve ocean views for other residents. Well, Monarch Bay Terrace Property Owners Assn. v. Johnson, Case No. G043518 (4th Dist., Div. 3 Oct. 19, 2011) (unpublished) involved such a dispute where HOA obtained a primary $55,034 attorney’s fees award for enforcing a settlement earlier reached between a homeowner in a tree/ocean view dispute. Homeowner appealed, arguing that HOA did not prevail, but Justice Bedsworth--writing colorfully for a 3-0 panel--saw things otherwise. (How about this for a start: “This is a case about a tree--a pretty litigious tree it seems, for this is not its first time in court.” We know that the tree did not sue, although former U.S. Supreme Court Justice William Douglas did indicate in an environmental decision of note that trees should have standing. Justice Bedsworth also went on to talk about Joyce Kilmer’s poem on trees which began with the line “I think that I shall never see a poem lovely as a tree,” but did distinguish it in the pending controversy because “as far as we know, [appellant] offered no poetic comparisons between the aesthetic values of trees and oceans.”)

     The affirmance of the appeal really revolved around the fact that HOA ultimately prevailed so, as Justice Bedsworth said, “one fight, one victor--and to the victor went the spoils.” The main challenge was that the lower court initially had denied HOA’s request for fees at an earlier juncture “without prejudice.” However, the appellate court found that this did not mean that HOA might not ultimately win later (as it did) in light of subsequent proceedings, given that the settlement did allow for such additional fees. Fee award affirmed.

Deadlines/Private Attorney General Statute: Substantial Awards For Successful Appellate Work Affirmed In Long Ongoing Litigation

 

Trial Court Properly Rejected Comparison of Selective Tasks of Opposing Counsel in Gauging Reasonableness of Claimant’s Fee Request.

     Here is an interesting one where years and years of litigation may have come to a close in Vasquez v. State of California, Case No. D056598 (4th Dist., Div. 1 Oct. 19, 2011) (unpublished), resolving in the process some deadline and other issues relating to the lower court’s award of substantial attorney’s fees to the successful plaintiff for appellate work under Code of Civil Procedure section 1021.5.

Section 998: $62,638.20 Expert Witness 998 Expense Affirmed On Appeal

 

Reason Was That Expense Was Expressly Provided For And Proper On Its Face.

     This next unpublished decision, Van Alstyne v. Carter, Case No. C064004 (3d Dist. Oct. 18, 2011) (unpublished), is a nice complement to our recent posts of September 30 and October 19, 2011 on the recently published Second District decision in Adams v. Ford Motor Co.

     In Van Alstyne, plaintiff was hit with $62,638.20 in expert witness fees pursuant to Code of Civil Procedure section 998 after the appellate court reversed and remanded when plaintiff initially challenged the offer as being invalid (which the lower court had initially concluded). On remand, the trial court allowed extended briefing and concluded the expert witness fees were allowable, prompting plaintiff’s appeal.

     The Third District sustained the award based on the burden of proof allocation. If a statute expressly allows the particular item as costs and it appears proper on its face, the burden is on the objecting party (here, plaintiff/appellant) to show the costs were unnecessary or unreasonable. If the costs are not expressly allowable by the statute, the burden is the inverse, namely, on the costs claimant to show the charges were reasonable and necessary. (Foothill-De Anza Community College Dist. v. Emerich, 158 Cal.App.4th 11, 29 (2007).) In this instance, expert witness costs are allowable upon rejection of a 998 offer by statute (satisfying the first prong) and were facially proper (satisfying the second). This meant the burden of proof was on plaintiff objecting party, who did not surmount the burden of showing they were unnecessary/unreasonable.

     Also, the appellate court allowed postage, phone calls, copies, and meals charged by the expert as allowable costs, finding nothing in CCP § 998(c)(1) excludes such expenses from being claimed.

Section 998/Expert Fee Reasonableness: Court Of Appeal Publishes Adams v. Ford Motor Co.

 

     In our September 30, 2011 post, we discussed Adams v. Ford Motor Co., Case No. B225791, which involved whether a small monetary CCP § 998 offer was reasonable and in good faith in a difficult causation case, where the offer did contain an important “waiver of costs” feature. Also, there was a nice discussion on how to show reasonableness of substantial expert witness expenses in a costs memorandum battle.

     We can now report that the Second District, Division 1 certified Adams for publication on October 19, 2011.

Assignment: Assignor Cannot Escape Burdens By Assigning To Closely-Held Assignee For Purposes Of Escaping Attorney’s Fee Exposure

 

Assignor Controlling Litigation Should Not Avoid Fee Exposure Via Assignment.

     Plaintiff owner and his wholly-owned corporation lost a specific performance, rescission, and declaratory relief suit to trustees of a revocable trust after trustees obtained an evidentiary preclusion order upon plaintiffs’ refusal to provide discovery on the “ready, willing, and able” purchaser issue. Then, the trial court held plaintiff owner individually liable for attorney’s fees of $816,683.80 and $41,544.67 of costs under a fees clause in the purchase agreement, notwithstanding his assignment of interests in the litigation to his corporation on the eve of trial.

     He appealed the merits and fees/costs judgments, but lost on appeal in Clement v. Alegre, Case No. A125953 (1st Dist., Div. 2 Oct. 18, 2011) (unpublished).

     Simplicity often times determines cases, as it did here. An assignment carries with it all rights of the assignor. Even though the assignor can transfer his or her rights, the assignor cannot escape the burden of his or her obligation by an assignment. Plaintiffs could cite no cases holding “that a plaintiff may evade its liability for attorney fees by assigning its rights in the litigation to its coplaintiff”--all the more so because plaintiff controlled the litigation since inception.

     BLOG UNDERVIEW--For all you California real estate practitioners, this case has a great discussion of the “ready, willing, and able purchaser” case law. Also, it demonstrates that if you put an issue at stake in a case, you better provide the other side discovery on that issue or risk preclusion (the “you cannot blow hot and cold” principle).

Changes to the Policy Forms of an Intriguing New Insurance Product Make it Even More Beneficial to Potential Insureds

Contract Litigation Insurance Version .2 – An Upgrade.

     In our August 3 and 6, 2010 posts and our March 8, 2011 post, we have followed a particularly intriguing insurance product geared directly to the issue of attorneys fees -- Contract Litigation Insurance offered by Sonoma Risk Insurance Agency.  We described the coverage in depth in those prior posts -- but again, it is a new form of insurance coverage for an adversary's attorney's fee award after trial or summary judgment, subject to certain conditions, exclusions, and underwriting standards.
     We had the opportunity to recently speak with Sonoma Risk CEO, Kevin B. Martin, who offered up some valuable new information regarding their innovative product.

In The News . . . . One Piece of the MGA Entertainment Puzzle May Be Settled

 

MGA and Its Former Law Firm O’Melveny & Myers Have Reached Tentative Settlement.

     In the fallout from the MGA-Mattel battle, MGA Entertainment’s former counsel O’Melveny & Myers had sued MGA to collect $10.2 million in disputed billings for O’Melveny’s former role in the Mattel litigation (representing MGA from 2007 to 2007). MGA had launched a malpractice countersuit against O’Melveny. O’Melveny had moved for discovery sanctions against MGA in the suit pending before Los Angeles County Superior Court Judge Elizabeth White. Judge White was leaning toward sanctioning MGA, and MGA dropped the malpractice claims on August 26, 2011 (soon after O’Melveny moved for sanctions, apparently trying to moot the sanctions request).

     Now, the parties recently indicated to Judge White that they had reached a tentative settlement and needed more time to iron out the details, a request obliged by Judge White in setting a November 7 further status conference.

     More details can be found in Amanda Bronstad’s October 12, 2011 post at The National Law Journal website.

Trade Secrets: Voluntarily Dismissed Action Did Not Lead to Award Of Attorney’s Fees In Trade Secret Action

 

Trial Court Found That Employer Did Not File Action in Bad Faith.

     Bad faith trade secret claims allow the court to discretionarily award reasonable fees and costs to the prevailing party, although the claimant has to prove both objective speciousness of the plaintiff’s claim and subjective bad faith in bringing/maintaining the claim. (Civ. Code, § 3426.4; Gemini Aluminum Corp. v. California Custom Shapes, Inc., 95 Cal.App.4th 1249, 1262 (2002).)

     In Rusnak Auto Group v. McTaggart, Case No. B224239 (2d Dist., Div. 2 Oct. 12, 2011) (unpublished), the trial court denied an employee’s request for section 3426.4 fees after employer voluntarily dismissed a trade secrets claim, finding no bad faith. Employee appealed, but did not win at the appellate stage either. Conflicting declarations had been submitted before the lower court, so the appellate court assumed that the trial judge accepted the dismissing plaintiff’s version of the facts and reasons that showed why its prosecution of the action was proper.

Indemnity: Labor Code § 2802 Does Not Require An Employer To Reimburse Employee For Attorney’s Fees In Successfully Defensing Employer Claims

 

Court of Appeal Also Determines Corporations Code section 317 Mandatory Indemnification Provisions Do Not Apply to LLCs.

     Justice Ikola, in a 3-0 decision of our local Fourth District, Division 3, made two important determinations on its behalf in Nicholas Laboratories, LLC v. Chen, Case No. G044105 (4th Dist., Div. 3 Oct. 12, 2011) (certified for publication).

     First, after finding no state or federal decision precisely on point, the appellate court decided that “indemnify” under Labor Code section 2802 usually relating to third-party claims does not extend to an employee being able to obtain reimbursement of fees expended in defending against an employer’s claims. Justice Ikola found that “the more expansive fabric of law” relating to fees (such as the American Rule and other fee-shifting principles) did not condone stretching the reach of section 2802 to employer claims.

     Second, Corporations Code section 317--which mandates indemnification of corporate agents under certain circumstances--did not apply, because an LLC was involved (rather than covered corporations under section 317). Although there are LLC Corporations Code provisions that permit indemnification, nothing in the LLC Act has a analog mandatory indemnification provision.

     Employee must have been unhappy in losing his attempt to obtain reimbursement of almost $90,000 in attorney’s fees, even though the trial and appellate courts saw things the same way.

In The News . . . . Winklevoss Twins Lose Malpractice Claim Against Quinn Emanuel And Bill Lerach Made Up To $70 Million In Enron Case

 

Quinn Emanuel Entitled to $13 Million Contingency Fee For Settlement With Facebook.

     Ever seen the film “The Social Network”? It deals with the dispute between the Winklevoss twins and social-media giant Facebook. Quinn Emanuel Urquhart & Sullivan, a well-known Los Angeles trial firm, helped the twins reach a $65 million settlement in a dispute between Facebook and ConnectU, the twins’ network website. Brothers fought giving Quinn Emanuel’s its agreed-upon $13 million contingency fee for the settlement, bringing a malpractice suit that claimed Quinn Emanuel miscalculated Facebook’s stock value during the settlement negotiations. An arbitration had earlier decided that the $13 million fee should be paid, a determination confirmed by a trial judge. On October 6, 2011, New York’s Appellate Division dismissed the twins’ malpractice suit against Quinn Emanuel, which is now $13 million richer. We thank an October 11, 2011 post by Thomson Reuters News & Insight for this part of our post.

Bill Lerach Made Up to $70 Million in the Enron Federal Securities Case.

     Remember Bill Lerach, the famous federal securities class action attorney who was convicted of a felony under a plea deal and spent about 19 months in prison? Well, he's out and doing gardening as well as a lot of traveling lately. As reported in an October 12, 2011 post by SFGate.com, Mr. Lerach earned about $10.3 million a year between 1990-1998, although he had to pay about $8 million in fines and penalties under his guilty plea arrangement. However, even while he was incarcerated, Mr. Lerach’s former firm convinced a Houston district court judge to award fees of $688 million plus interest to the class action attorneys involved in the case. It is reported that the firm even helped Mr. Lerach get a reported share of $70 million for Enron work. Zowee!

In The News . . . . Various Articles Talk About Attorney Pay, Per Partner Compensation, Use Of Alternative Fee Arrangements, And Use Of Contract Attorneys.

     We thank co-contributor Mike’s father-in-law Tom Basehart for sending him a folder of articles to review for possible inclusion as a posting in the blog. He was right to send these articles, because they share valuable information and trends for all of us.

American Lawyer Survey About Per Partner Profits Going Up By 8.4% in 2010 May Not Be As It Seems.

     According to the American Lawyer, profit per partner at America’s 100 biggest firms rose by 8.4% in 2010, after having fallen by 4.8% in 2008 and only going up by a measly 0.3% in 2009. (That after the 250 biggest firms in the National Law Journal’s annual surveys shed more than 9,500 lawyers in 2009 and 2010, nearly 8%.)

     Well, according to an analysis by Citi Private Bank Law Firm Group, some of those firms may have overstated a key measure of profitability. A person briefed on Citi’s analysis, as reported by a 2011 article in The Wall Street Journal, reported that roughly 22% of the top 50 firms overstated their profits per partner by more than 20% in 2010, an additional 16% inflated their numbers by 10-20%, and an additional 15% of the firms had profits-per-partner figures that were inflated by 5-10%.

Legal Services Spending As Percentage of America’s GDP and Growth of Alternative Fee Arrangements.

     A May 7, 2011 article in The Economist reports two important statistics:

     *Spending on legal services grew from 0.4% of America’s gross domestic product (GDP) in 1987 to 1.8% in 2003, four times faster than the economy; and

     *Alternative fee arrangements to the traditional hourly rate paradigm have continued to grow in importance, accounting for 16% of big firms’ revenue in 2010.

     The article had a cute photo of a homemade billboard saying this (apparently from the Midwest): “Mamas don’t let your babies grow up to be lawyers; let them be farmers or loggers and such.”

Average Law Firm Lawyer Salary Versus Other Countries.

     According to a September 2, 2011 article in The Economist, the average American law-firm lawyer made $191,000 in 2000, compared to an average salary for all Canadian lawyers of $64,000 in 2002 and to an average salary for Australian lawyers of $90,000 in 2000. A Brookings study found that of the $170 billion spent on lawyers every year in America, some $64 billion is a “premium” produced by “market distortions.”

Contract Lawyer Staffing Is Growing, But Leading to Suits.

     The Wall Street Journal, in an August 2, 2011 article, reports that temporary legal staffing in the U.S. is projected to increase by 25% cumulatively over the near two years, according to a recent estimate by research group Staffing Industry Analysts. However, it describes a lawsuit against McDermott Will & Emory LLP for using temp lawyers who allegedly turned over privileged or irrelevant documents to the U.S. Attorney’s L.A. office. McDermott has denied the allegations.

Non-Partner Associate Lawyer Salaries Rise.

     In an August 12, 2011 article in The Wall Street Journal, it is reported that the average hourly rate for a non-partner associate lawyer at a law firm (and we assume this is the hourly rate for larger firms) rose to $378 in the second quarter of this year, up from $338 three years earlier, all according to data from Peer Monitor, a unit of Thomson Reuters. The current average hourly rate for first-year associates at such law firms is $283, Peer Monitor says.

Prevailing Party/Section 1717: Landlord Prevailed Where It Recovered All Of Monetary Damages Sought And Despite Dismissing Action At Court’s Insistence Later

 

$83,153 Fee Award Sustained Against Losing Tenant.

     Landlord sued tenant for unpaid rent under a prior settlement agreement under which the lease was terminated, tenant would vacate the premises in “turn key” condition, and assign certain FF&E (furniture, fixtures, and equipment) as well as its liquor license. The agreement also specified that landlord could bring an action against tenant for the unpaid rent plus damages at a specified per diem rate. The settlement agreement importantly provided for an attorney’s fees award to the prevailing party in the event of litigation. Landlord sued after tenant failed to perform under the settlement agreement, with the parties agreeing to a stipulation that led to the release of significant writ of possession funds being held by the sheriff (which satisfied the unpaid rent claim) and specified that tenant would pay all claims for daily damages/interest.

      Landlord then moved to recover $94,653 pursuant to Civil Code section 1717 and Code of Civil Procedure section 1033.5, which was granted in the sum of $83,154--prompting an appeal by tenant. Later, landlord dismissed the action with lower court imprimatur after it determined that landlord had obtained all necessary relief so there was nothing left to do.

     Tenant was unsuccessful in Rose Garden Associates Danville, LLC v. ResMex Partners, LLC, Case No. A130562 (1st Dist., Div. 3 Oct. 7, 2011) (unpublished).

     The fact that there was no judgment was irrelevant, because section 1717 does allow for fee recovery “whether or not the suit proceeds to final judgment” so that the settlement agreement clause was a solid anchor for landlord’s entitlement. Also, even though there were some niggling issues left on the FF&E feature of the settlement, landlord certainly prevailed by getting all of its monetary relief such that the fee motion was ripe for determination given the overwhelming recovery achieved by landlord. The dismissal did not lead to a different result, because the court actually entered the dismissal and tenant had taken a 180 degree opposite position on its effect in the lower court.

SLAPP: Consideration Of Attorney’s Fees In Separate Motion After Voluntary Dismissal Of Prior Cross-Complaint Is Acceptable Trial Court Procedure

 

Fee Order Reversed By Lower Court When Separate Fee Motion Procedure Used.

     Although the appellate court aptly described the overall cause as a “trial court’s resolution of a procedural morass” under the anti-SLAPP statute, JP Builders, Inc. v. Leebove, Case No. A130270 (1st Dist., Div. 1 Oct. 7, 2011) (unpublished) does confirm the flexibility accorded to lower courts when adjudging fee requests under the anti-SLAPP mandatory fee shifting statute after plaintiffs dismiss complaints.

Flexibility

     Boiling the facts down somewhat, plaintiffs dismissed a cross-complaint in a homeowner-contractor construction defect/payment dispute after an anti-SLAPP motion was filed, which prompted the court to still rule on the motion and issue a tentative granting fees of $7,429 to the successful cross-defendant contractor. However, the lower court concluded that the contractor should file a separate attorney’s fees motion which ultimately was denied when the court determined that homeowners demonstrated a probability of prevailing on their claims after opposition papers were submitted. Contractor sought appellate relief.

     Contractor did not get it.

     Using a separate motion to adjudge anti-SLAPP fees is a very acceptable alternative, with the appellate court observing “we see no reason why a trial court would lack the power to proceed in that fashion.” (Slip Opn., p. 9.) Then, on the merits, the appellate court saw no error in the trial court’s shift in opinion on the fees issue since the contractor’s alleged conduct was just that--tied to conduct (shoddy workmanship and overbilling), not protected activities.

Employment/Special Fee Shifting Statute (Pen. Code, § 502)/Reasonableness Of Fees/Allocation/Substantiation Of Fees: $980,373.50 Fee Award To Ex-Employee Not Paid All His Promised Commissions And Subject To Personal Computer Tampering Affirmed On App

 

Appellate Court Found Lower Court Correct to View L.A. Attorneys As Within San Bernardino Venue and Necessary Given Earlier Misfortunes with Local Attorneys.

     Trealoff v. Forest River, Inc., Case No. E048818 (4th Dist., Div. 2 Oct. 6, 2011) (unpublished) was a case where an ex-employee won sizable jury verdicts, including punitive damages, for not being paid all of his promised commissions (which has fee-shifting recourse under the Labor Code) and for being the victim of employee computer tampering (which allows a discretionary award of fees under Penal Code section 502). On top of all that, he was awarded $980,373.50 (out of a requested $1,624,301) in attorney’s fees to some of prevailing party’s attorneys. Both sides appealed, with defendants contesting the award and plaintiff contending the punitive damages award should not have been reduced by the trial court (the latter contention failing on appeal).

Construction: Prevailing City Retaining Funds Does Not Divest Its Prevailing Party Status Because It Had To Eventually Turnover Retained Funds Over The Amount of the Merits Judgment

 

Section 1717 Still Allowed Recovery to the Prevailing Party.

     The Fifth District, in Greg Opinski Construction, Inc. v. City of Oakdale, Case Nos. F060219/F060727 (5^th Dist. Oct. 6, 2011) (certified for partial publication; fee discussion not published), affirmed a lower court decision finding that the city was entitled to recover from its general contractor $54,000 in liquidated damages for late completion, $3,266 for construction defect repairs, and $97,775 (out of a requested $104,478.67) in attorney's fees, with the fee award being based on a reciprocal contractual fees clause.

     On appeal, general contractor basically contended that city did not "prevail" because the amount it retained while the dispute was pending was more than enough to cover the merits judgment, meaning that city really received no net monetary recovery for purposes of a fee award.

     The Fifth District, in a 3-0 opinion authored by Acting Presiding Justice Wiseman, did not buy it. Rather, it found Sears v. Baccaglio, 60 Cal.App.4^th 1136 (1998) analogous, where a party did prevail by winning a positive monetary award even where he had been paid more than the award loss already from several other sources. City was still the "net" winner in this situation, with the appellate court refusing to apply routine costs principles when it came to determining the prevailing party in a fee context. Finally, policy reasons also prevailed: ". . . in our review it would make little sense to deem a contractor a prevailing party solely because the contractor obtained an order for release of retention funds. Public Contract Code section 7107, subdivision (c), makes it lawful for an owner to retain 150 percent of an amount in dispute. A determination at the end of the lawsuit that the owner must release some of the money does not mean the owner has acted wrongly. A court might find that the only breach of contract was a breach by the contractor. Retention money might still be owing to the contractor, since the damages the contractor caused might be less than 150 percent of the disputed amount. That would not show, however, that the owner had breached the contract or that the contractor had prevailed. That is the situation in this case. The city prevailed on its claim on the contract; [general contractor] failed in its claims on the contract; the amount of damages was less than the amount retained; and [general contractor] would have owed a portion of the retention funds if not for the attorneys' fees award. The court had discretion to find that the city, not [general contractor], was the prevailing party in this state of affairs." (Slip Opn., pp. 27-28.)

In The News . . . . Orange County Will Pay $1.3 Million In Legal Fees To Deputies Union After County Loses Challenge To 3% At 50 Pension Benefit

 

Orange County Also Bore More Than $2 Million of Legal Fees During Unsuccessful Battle.

     As reported by Kimberly Edds in an October 6, 2011 article in The Orange County Register, the Orange County Board of Supervisors has approved a settlement with the Association of Orange County Deputy Sheriffs after losing a challenge to the 3% at 50 pension benefit, when the Second District Court of Appeal sided in January 2011 with the deputies. Under the settlement, the County will pay the Association $1.3 million to cover some portion of its legal fees, after County itself incurred more than $2 million in the unsuccessful lawsuit. The settlement also includes $312,000 for the Orange County Employees Retirement System to reimburse its portion of lawsuit costs. The settlement was the result of mediation sessions presided over by Retired Justice Howard B. Wiener (who used to sit on the Fourth District, Division 1 and has acted as a retired neutral for a number of years).

Damages/Family Law: “Somewhat Unusual” Case Involving Pro Tem Judge Conflict Cost Transitory Winning Litigant’s Attorney $780,482 In Damages For Attorney’s Fees Expended In Dissolution Proceeding Tainted With The Conflict

 

No, Love Lost as Fourth District, Division One Reverses JNOV Disfavorable to Initially Losing Litigant, Who Won a Jury Verdict, Was Then Overturned Post-trial, and Was Vindicated on Appeal.

     This one caught our attention because of the appellate court’s rather subdued characterization of it being a “somewhat unusual case.” Wow! This is one unusual case in our view, but we will let you be the judges.

     Rogozienski v. Love, Case No. D056857 (4th Dist., Div. 1 Oct. 5, 2011) (unpublished) involved an underlying dissolution proceeding where husband and wife agreed to have the matter heard by a family law practitioner sitting as a pro tem judge. (Respondent Love was wife’s attorney, and Appellant Rogozienski was the husband.) After pro tem judge entered a judgment decidedly adverse to husband’s interest after a three-phase trial, husband discovered that pro tem judge had a conflict--while the dissolution action was pending, Love transferred his interest in a vacation home to a third party, which then transferred the interest to pro tem judge. Once husband obtained discovery of this transaction and made a fuss about it, the pro tem judge withdrew from the case and his rulings were vacated in entirety after further trial and appellate court proceedings.

     Husband then sued both pro tem judge and Love (wife’s attorney) for civil damages, mainly claiming as damages the attorney’s fees he incurred in the first round of litigation due to Love’s conduct after previous proceedings resulted in a consensus that the pro tem judge had judicial immunity. Husband’s case proceeded to a jury trial where he won $780,482 in damages against Love. However, Love won a JNOV on the theory that husband did not prove that the gift was the real legal cause of his lost litigation expenses.

     The Fourth District, Division 1 reversed and reinstated the jury’s verdict. Although basic equities did pervade the appellate court’s decision, it did not buy the argument that the gift of the home was not instrumental in husband’s targeted loss and that other attacks would have necessarily resulted in vacating of the pro tem judge’s rulings.

     BLOG UNDERVIEW--Although not referenced in the decision, we did some public searches because this dispute did catch our attention. The California State Bar filed a Notice of Disciplinary Charges against both the pro tem judge and Mr. Love, both of whom responded in 2007 to the Bar charges. The latest we could find was that a status conference in the matter was scheduled for January 18, 2011; otherwise, nothing else to report.

Probate: $38,000 Fee Award Against Holographic Will Executor Reversed Based On Lack Of Statutory Basis

 

Gotta Have a Basis, Or Else Fee Recovery is Toast.

[Above:  April 1942.  Ann Rosener, photographer.  Library of Congress.]

     In Estate of Brown, Case No. G043780 (4th Dist., Div. 3 Oct. 4, 2011) (unpublished), a lower court awarded $38,000 in attorney’s fees to respondents in a bitter probate petition battle in which appellant was apparently deemed to be the executor under a holographic will pursuant to resulting or constructive trust theories. Appellant appealed from the adverse award, claiming there was no entitlement basis for the award.

Civil Rights: Fee Recovery Erroneously Denied To Prevailing Civil Rights Plaintiff Defended By Her Attorney-Spouse

 

In Pro Per Restrictions Do Not Apply to Representation by One’s Spouse.

     A plaintiff prevailed on a civil rights claim and then sought recovery for work done by her attorney spouse and a co-counsel non-spouse. The district judge awarded plaintiff fees charged by co-counsel in the amount of $13,770 (out of a requested $21,420) under the federal civil rights fee-shifting statute, but denied entirely the request to reimburse any part of her spouse’s work (requested fees of $124,510).

     The Ninth Circuit, in Rickley v. County of Los Angeles, Case No. 09-56498 (9th Cir. Aug. 19, 2011; amended Oct. 4, 2011) (for publication), reversed.

     Nothing in 42 U.S.C. § 1988 (the civil rights fee-shifting statute) or IDEA (a statute having an analogous fee shifting provision in the educationally disabled area) imposes a general rule requiring counsel to be independent and emotionally detached. Plaintiff did not represent herself, such that her spouse’s representation did not trigger the in pro per bans applicable to both plaintiffs and defendants in the civil rights area. To further support the result, the Ninth Circuit cited two federal district court decisions refusing to apply the in pro per restrictions to attorney spouses.

Private Attorney General: $7 Million In Potential Future Benefits Allows Denial Of Fee Request

 

Water Connection Charge Was Reduced, But Winning Litigant Denied CCP § 1021.5 Fees.

     A home builders group and developer were denied a requested award of $150,000 in section 1021.5 fees even though a Water District substantially reduced a water connection/capacity fee for residential units to be constructed when the economy improves as a result of plaintiffs‘ action.

     The unsuccessful fee-seeking plaintiffs appealed in Home Builders Assn. of No. Cal. v. Sunnyslope County Water District, Case No. H035899 (6th Dist. Oct. 3, 2011) (unpublished).

     They did not prevail on appeal because the record showed that developer potentially saved $7 million in future costs for the charges imposed upon new construction. This was tangible enough of a benefit to keep appellants from satisfying the financial burden element of section 1021.5.

Arbitration: MFAA Nonbinding Fee Award Confirmed Because Losing Attorney Did Not File A Court Action 30 Days After Rendition Of Award

 

Award Rejection and Petition to Vacate Arbitration Award Are Not “Action” Filing Equivalents.

     We have posted in the past on the importance of observing formalities when it comes to rejecting a nonbinding award in an attorney-client arbitration under the Mandatory Fee Arbitration Act (MFAA). Well, here is another unpublished decision that tells attorneys, when they lose, to strictly adhere to the rules. Or, put more forcefully, make sure you have a collection action already on file or file it within 30 days of the nonbinding arbitration award.

     In Avetisyan v. Gordon, Case No. D057916 (4th Dist., Div. 1 Sept. 30, 2011) (unpublished), attorney and client arbitrated a fee/costs dispute under MFAA via the nonbinding track with respect to attorney’s client handling of an immigration matter for client. Client won a nonbinding award of $7,600 plus a $375 arbitration filing fee against attorney, who filed a rejection of the award and later moved to vacate the arbitration award within the 30 day deadline from the transmittal of the award. However, attorney did not file a court action in connection with the award. Mistake.

     The lower court granted client’s petition to confirm the award, this time escalating the amount of the judgment to $19,316.70 (after other fees and costs were added).

     Attorney appealed.

     Not so good for attorney on appeal. The problem here was that attorney failed to file an action to collect fees within 30 days of the arbitration award. Simply filing a rejection of the award or a petition to vacate the award did not suffice. Judgment based on award in client’s favor was affirmed in this one, which has object lessons to teach all attorneys attempting to collect fees (and subject to MFAA arbitration, which usually is the case).

Special Fee Shifting Statute: $2,000 Attorney’s Fees Cap To Prevailing Parties On Motions To Expunge Stale Mechanic’s Liens Has Been Lifted Effective July 1, 2012

 

Senate Bill 189 Amendments Made This Happen.

     Every practitioner involved with mechanic’s liens should hopefully know, by now (or by reading this blog), that there are many changes made to the mechanic’s lien law by Senate Bill 189, some taking effect this year and some on July 1, 2012.

     One of July 1, 2012 effective changes involves Civil Code section 3154, which is a statutory provision allowing owners to petition the court to expunge a mechanic’s lien that has become stale because the claimant did not timely file a lien foreclosure suit. Prior to July 1, 2012, the most a prevailing party could recover in this expungement proceeding was $2,000. (Civ. Code, § 3154(g).) Now, this capped limitation has been lifted so that the attorney’s fees can be whatever amount the court determines to be reasonable in nature.

SLAPP/POOF!: $38,784.50 Fee Award Goes POOF! Upon Reversal Of SLAPP Grant

 

     In Panakosta Partners, LP v. Hammer Lane Management, LLC, Case No. C065812 (3d Dist. Sept. 27, 2011) (certified for publication), minority limited partners were hit with an adverse fee award of $38,784.50 when majority partners SLAPPed them for bringing a petition for buyout (to avoid a judicial dissolution) under Corporations Code section 15908.02. The fee award went POOF! upon the appellate court's determination that the petition for buyout was not subject to being SLAPPed.