CALIFORNIA ATTORNEY'S FEES

Requests For Admissions: $49,031 “Costs Of Proof” Sanctions Properly Denied By Trial Court

 

Defense Waived Sanctions By Not Moving to Compel Further Responses to Incomplete RFA Responses.

     We have blogged many times before on the “costs of proof” sanctions available to litigants that can show the opponent made them expend unnecessary fees and costs in proving facts at trial that were denied in earlier requests for admission responses.

     However, Smith v. GNP-Crescendo Record Co., Inc., Case No. B235551 (2d Dist., Div. 1 May 25, 2012) (unpublished) reminds us that “costs of proof” sanctions can be waived if certain other procedural requirements are not met.

     There, plaintiff lost a music royalty acounting dispute, with defendants moving to recoup $49,031 “costs of proof” sanctions arising from plaintiff’s earlier denial of certain RFAs. The lower court denied the request, a determination affirmed on appeal.

     Two reasons supported affirmance. First, defendants never challenged incomplete RFA responses through a motion to compel, effectively waiving the ability to collect “costs of proof” sanctions. (Code Civ. Proc., § 2033.420(b)(1).) Second, plaintiff had a reasonable belief to deny certain requests based upon obtaining a music industry expert declaration supporting a contention that certain royalty contractual provisions were unconscionable in nature. (§ 2033.420(b)(3).)

In The News . . . A Plethora Of Recent Class Action Fee Awards And Irwindale City Council Refuses to Pay Fees In Councilman’s Embezzlement Trial

 

N.J. District Judge Awards Firm $2.3 Million In Fees In Eating Disorder Insurance Coverage Case.

     The National Association of Legal Fee Analysis (NALFA), which has an excellent blog website, has reported on some recent class action fee recoveries.

     The first one is an eating disorder insurance coverage class action. A New Jersey district judge awarded plaintiffs’ N.J. law firm $2.3 million in fees and expenses for its work in reaching a $1.18 settlement in the case. Plaintiffs requested a 1.4 multiplier-enhanced $2,196,580 in fees plus expenses bringing the total request to $2,309,086. The Newark-based judge appears to have awarded a fair amount of the request, although the fee award has been appealed to the Third Circuit.

Plaintiff Firm Garners $1.575 Million In Fees/Expenses in Philips/Magnavox Malfunctioning T.V. Class Action.

     The second class action fee recovery involved a $4 million settlement confirmed by another N.J. district judge in the Philips/Magnavox malfunctioning television class action. Although awarding $1.575 million in fees/costs, the judge applied a .75 multiplier to the lodestar, which represented 39% of the cash portion alone under the recovery of fund method. (In re Philips/Magnavox Television Litig.)

First Circuit Seems Skeptical of Fee Award in Volkswagen Multidistrict Case.

     The third matter was the First Circuit Court of Appeals argument relating to the fee award in Volkswagen Group of America, Inc. v. Peter J. McNulty Law Firm. There, a district judge awarded $30 million in fees and $1.2 million in costs to the plaintiff law firm in a multidistrict case. The parties had agreed to a “clear sailing” clause by which plaintiff would seek no more than $37.5 million in fees and $1.8 million in costs. VW did challenge basing the fee award on the percentage of fund measure because the settlement agreement apparently said fees would not be based on benefits. If the proper lodestar analysis was used, somewhere around $7.7 million would have been the fee award. Plaintiff law firm, in rebuttal, said that the lodestar was used by the district judge to “check” the percentage of recovery method. Apparently, the First Circuit had some concerns with the award at oral argument.

Irwindale Will Not Pay for Embezzlement Trial Defense of Councilman Garcia.

     As reported by J.D. Velasco in a May 26, 2012 post in The San Gabriel Valley Tribune, the Irwindale City Council, with certain members recused, denied a request to reimburse attorney’s fees by an attorney representing Councilman Garcia in an embezzlement trial arising from charges that he and other councilpersons/a former city manager took lavish New York trips costing taxpayers $200,000 between 2001-2005.

Prevailing Party/Section 1717: Successor Trust Deed Lender Entitled To Attorney’s Fees Recovery Against Extinguished Lienholder Based On “Practical Liability” Section 1717 Doctrine

 

Saucedo Case Found to Support Fee Recovery.

     Saucedo v. Mercury Sav. & Loan Assn., 111 Cal.App.3d 309, 315 (1980) is an interesting section 1717 decision where plaintiffs (nonassuming grantees) of a property subject to a note/trust deed beat the lender under loan documents with a fees clause. Plaintiffs were allowed fee recovery because, under the note/trust deed, the lender was entitled to having fees added as part of the debt secured by the trust deed. In order to prevent foreclosure, plaintiffs would have had to pay the debt (if they lost), inclusive of fees, so that this “practical liability” triggered the section 1717 mutuality remedy even though they were not in technical privity with the lenders due to acquiring the property from privity-related borrowers.

     Well, Saucedo’s rationale was dispositive over 30 years later in Vineyard Bank, NA v. DFI Funding, Inc., Case No. B224656 (2d Dist., Div. 6 May 24, 2012) (unpublished).

     There, Vineyard made a secured loan of money to borrower through a first priority trust deed even though another lender loaned money secured by a more limited interest in certain real property through a second trust deed. Vineyard then loaned additional money, with a title search not picking up on the second trust deed, with first lienholder recording a full reconveyance of the first trust deed and arguably moving second lienholder ahead from a priority perspective. Vineyard foreclosed through a non-judicial foreclosure, second lienholder initiated its own non-judicial foreclosure, and Vineyard filed suit to enjoin the second lienholder foreclosure, with the lower court issuing an injunction in favor of Vineyard. Jurors found that the second lienholder trust deed was ambiguous and did not create a lien against a property, but a much more narrower interest that did not reach the property. Subsequently, the lower court awarded $376,466.45 in fees based on the second lienholder’s trust deed fees clause, as well as $12,122.90 in litigation costs, to Vineyard, prompting an appeal by the losing lender.

     Fee/costs awards affirmed on appeal, based on Saucedo. The “practical liability” section 1717 doctrine was determinative, because second lienholder had a fees clause that would have added its fees as prevailing party to the debt and first lienholder (now owner of the property) would have had to pay off this enriched indebtedness.

     Losing party argued that this was nothing more than a competing lienholder dispute not triggering fee exposure, but the appellate court found that this was an improper characterization--the dispute was by a property owner (former foreclosing first lienholder) against a second lienholder attempting to enforce an interest akin to that involved in Saucedo. Simply put, “[t]his distinction has a difference.”

Appealability/SLAPP: Defense SLAPP Fee Recovery Of $12,633 Sustained Because Plaintiff Forfeited Claim On Appeal

 

Plaintiff Failed to Properly Present His Estoppel Theory For Factual Exploration By the Trial Court; Appealability Issue Did Not Impact Appeal, But Waiver Did.

     Plaintiff, who suffered an adverse SLAPP fee recovery of $12,633, might have had a chance on appeal on an estoppel theory. However, the problem is that he did not properly present it for consideration by the trial court, resulting in a waiver on appeal.

     In Hartnett v. San Diego County Bd. of Education, Case No. D059646 (4th Dist., Div. 1 May 25, 2012) (unpublished), plaintiff had a letter from opponent’s counsel that conceded the defendant Commission did not pay legal fees and could not take an active role in arguing for recovery of fees if its motion were granted. Plaintiff, however, did not raise/develop the equitable estoppel issue in opposition paperwork and only mentioned it in fleeting reference during oral argument on the fee motion. (The letter was attached to an opposition declaration.) Given that estoppel is a factually intensive doctrine, this presentation was too cursory such that the argument was forfeited on appeal.

     With respect to appealability, the defense claimed that the appeal should be dismissed because plaintiff only appealed the fee fixing second order rather than a first order indicating entitlement to fees but fixing later. Nope, said the appellate panel. Plaintiff did appeal the postjudgment order awarding (fixing the amount of) fees and costs, which was a separately appealable order. (PR Burke Corp. v. Victor Valley Wastewater Reclamation Auth., 98 Cal.App.4th 1047, 1053 (2002).)

Costs/Private Attorney General: Nonprofit Organization Losing 5 Of 6 Issues Not Entitled To CCP § 1021.5 Fee Recovery For CEQA Reconsideration That Did Not Change Project

 

Public Hearings Remand Was a Limited One, At Best; Attorney/Paralegal Work Stricken From Cost Award In County’s Favor.

     A nonprofit organization out to save blue oak woodlands from the consequences of a development appealed a denial of a requested fee recovery under CCP § 1021.5 after they won a limited public hearings remand under CEQA to reconsider the financial feasibility of a greater fee to mitigate traffic impacts on Interstate Highway I-5. It also appealed a costs award of $25,565 in favor of Tehama County as prevailing party.

     Blue oaks.  Flickr creative commons license.  Miguel Vieira, photographer. 

     The appeal did not overturn the fee award, but a substantial portion of the costs award was ordered to be subtracted in California Oak Foundation v. County of Tehama, Case No. C066415 (3d Dist. May 25, 2012) (unpublished).

     The problem was that nonprofit lost the blue oak woodlands issue and five of the six remaining mitigation issues. The financial feasibility remand issue resulted in sparsely-attended public hearings and the County arrived at the same position it reached previously with respect to the project. Under these circumstances, no “significant benefit” was achieved for section 1021.5 purposes such that the lower court did not abuse its discretion in denying the fee request.

     The County’s cost award was another matter altogether. $15,771.25 of the costs award comprised a JD/prospective attorney’s work in summarizing a PowerPoint presentation for trial which, at a $185 hourly rate, could only be characterized as attorney/paralegal fees not recoverable as costs. (Science Applications Internat. Corp. v. Superior Court, 39 Cal.App.4th 1095, 1104 (1995); Code Civ. Proc., § 1033.5(a)(10).) This amount was subtracted, with the remaining judgment affirmed by the appellate court.

Arbitration/Prevailing Party: Only One Prevailing Party For Civil Code Section 1717 Purposes Under One Contract After Exhaustion Of Arbitration Proceedings

 

Parameters of “Discrete Win” Doctrine Probed, With Interim Wins On Petitions To Compel Arbitration Not Determining Eventual Winner Unless Discrete Proceeding Ended Matter.

     Frog Creek Partners, LLC v. Brown, Case No. A129651 (1st Dist., Div. 5 May 24, 2012) (certified for publication) is a scholarly opinion considering, in a two party-one contract context arising under Civil Code section 1717, which party is the prevailing one where one party won an interim petition to compel arbitration although it ultimately lost the ultimate contractual dispute in a subsequent arbitration after successfully bringing a second petition to compel arbitration. Acting Presiding Justice Simons, in a 3-0 opinion discussing the various cases (Lachkar, Otay, Green, Kors, and Acosta), decided that (1) a lower court should not award section 1717 fees to a litigant who wins a petition to compel arbitration filed in an independent lawsuit but should await what happens in the arbitration, (2) a lower court can award fees to a litigant that obtains a denial of an independent petition to compel arbitration (not one brought in a lawsuit), because the victory in the discrete petition proceeding is a definite/final victory, and (2) a lower court should not award fees to a litigant who defeats a petition to compel arbitration in a filed lawsuit but await either the outcome in an arbitration or the lawsuit. (In this particular case, petitioner filed a renewed arbitration petition and won, and then won in the later in a 50-day arbitration--garnering $663,293 in net fees/costs, but after awarding the interim winner $125,000 in fees and denying ultimate winner’s request for $128,000 in fees for the initial petition to compel skirmishes. The appellate court in this one reversed the $125,000 fee award and remanded so that ultimate winner could obtain fees for the initial petition to compel battles, otherwise known as “to the victor goes the spoils”).

     In reaching its result, the appellate court disagreed with the reasoning in Kors and Acosta, which might put this decision higher up for state supreme court review given that the jurisprudence is rich and constantly evolving in this area. Also, the policy implications of this decision were discussed in lengthy footnote 18 of the slip opinion, with the appellate court deciding that no “race to the courthouse” will ensue because nothing indicated a defendant would gain “a predictably greater entitlement of fees” under section 1717 by filing an independent petition to compel arbitration.

Photo:  Red-backed poison frog.  Flickr creative commons license.  Dominik Hofer, photographer.

Family Law: $10,000 In Family Code Section 271 Sanctions Affirmed On Appeal

 

Mother’s Failure to Provide Detailed Financial Picture Ended Her Appellate Quest.

     Mother in Dorbie v. Fales, Case No. D059338 (4th Dist., Div. 1 May 24, 2012) (unpublished) challenged a Family Code section 271 $10,000 sanctions award on the basis she simply could not afford it.

     Unfortunately for her, the appellate court rejected her challenges to the award. Mother failed to provide a complete financial picture to contest the sanctions award, which literally was the end of the matter--coupled with the fact the lower court ordered that the sanctions be paid off at a rate of $250 per month to make them more affordable. The abuse of discretion standard of review was not surmounted in this appellate case.

Costs: Prevailing Party Must Only Serve Costs Memorandum After Judgment Is Filed, But Not After Notice of Entry of Judgment

 

     In Kansaku v. City of Hermosa Beach, Case No. B230611 (2d Dist., Div. 1 May 24, 2012) (unpublished), a non-prevailing party claimed that his motion to tax costs was erroneously denied on the ground it was untimely.

      Above:  Young women surfing at Hermosa Beach.  1920-1950.  Library of Congress.

     Nope, not under the circumstances. Prevailing party filed its costs memorandum after judgment was filed, but before notice of entry of judgment was served. Non-prevailing party filed its motion to tax costs one day too late--21 days later rather than the required 20 days (15 days plus 5 days for mail service).

     No abuse of discretion in denying the motion; after all, the tax costs motion was late. “There is no requirement that notice of entry of judgment be served before the prevailing party files its memorandum of costs.” (Slip Opn., p. 16.)

Section 998: Failure To Include Acceptance Provision Invalidates 998 Offer

 

Puerta Governs, Not Dependent on Whether Party is Represented Or Not, and Does Impact Substantial Rights of Party Claiming Offer Was Invalid.

     The defendant in Perez v. Torres, Case No. F061214 (5th Dist. May 24, 2012) (certified for publication) must have been kicking himself. He made a “successful” CCP § 998 offer that would have shifted almost $45,000 in costs to the plaintiff who did not beat the offer. However, there was a rub. (Yep, when you say there was a rub, you know there was a problem.)

     The defense forgot to include an acceptance provision in the 998 offer, which invalidated it under Puerta v. Torres, 195 Cal.App.4th 1267 (2011). The trial court taxed the defense request for costs, which led to an appeal.

     Defendant’s proffered distinctions of Puerta did not cut it on appeal.

First, although Puerta involved an unrepresented party, the appellate court found that the status of the litigant made no difference in this area -- to hold the omission was harmless when a 998 offeree is represented by counsel would allow an exception to swallow the brightline rule that the absence of the acceptance provision means the offer does not cut the mustard.

     The defense then argued “harmless error”--there was no indication that plaintiff would have ever accepted the offer. (Code Civ. Proc., § 475.) Not so fast, said the appellate panel, because such an argument is speculative at best and did impact the offeree who would have incurred $45,000 in costs that she was otherwise not obligated to pay. Hardly chump change and impacting substantial rights when it came to paying money.

     Puerta ruled yet again in this one.

Family Award: $15,000 Fee Award Affirmed In Favor Of Husband After Denial Of Marriage Nullification Petition

Court Rejects Suggestion That Fee Award and Sanction Cannot Be Made Against an Unemployed Person As “An Obviously Dangerous Rule”

     After a family law judge found that a marriage nullification petition by wife was “not that close,” he ordered $5,000 in fees to be paid to husband under Family Code section 2255 (successfully defending against a claim of fraud) and an additional $10,000 of his fees as a sanction for wasteful litigation tactics under Family Code section 271.

     Wife’s appeal of these awards was unsuccessful in Marriage of Aaronson and Oslica, Case No. A128516 (1st Dist., Div. 2 May 22, 2012) (unpublished).

     Although wife claimed that she was unemployed and this alone dictated a reversal, the appellate court was unconvinced. Rather, the appellate record demonstrated that wife had much less fees to be paid to her attorney than husband as well as retirement funds she could tap into. It rebuffed the concept, based on no authority, that “as a matter of law, a fee award and sanction cannot be made against an unemployed individual,” something it characterized as “an obviously dangerous rule.” (Slip Opn., p. 7.)

     Above:  “Forgotten women”, unemployed and single, in job demand parade.  1933.  Library of Congress.

     Also, the appellate court soundly rejected the argument that the settlement privilege of Evidence Code section 1152 precluded consideration of settlement discussions for purposes of evaluating whether to impose a family law sanction under Family Code section 271.

Section 1717: $142,000 Out Of Requested $316,335 In Fees Awarded To Party Achieving Litigation Objective, Although Only One-Third Of Requested Damages

 

Discretionary Call on Prevailing Party Was Given Deference.

     Wertheim, LLC v. Currency Corp., Case No. B218547 (2d Dist., Div. 1 May 22, 2012) (unpublished) was a loan dispute donnybrook with some wild assignment issues and the prevailing party basically winning the argument that lender charged more in interest and fees than was permitted by law. Plaintiff argued damages were $102,007, but the jury accepted the opponent’s argument that damages were only $38,554.48.

     Then, we get to what we like to blog about: fee recovery. winner requested fees of $316,335, but was awarded fees of only $142,000.

     Judgment affirmed on appeal, in a 3-0 decision authored by Justice Chaney. Even though winner only recovered a fraction of what it sought, it did achieve its litigation objective of winning the unlawful interest/fee argument. No abuse in awarding fees here--although we note the fee award was over 3 times the compensatory award.

Arbitration/Consumer Statutes: Waiver Of Attorney’s Fees Recovery In Residency Arbitration Provision Was Against Public Policy

 

Fee-Shifting Provision in Elder Abuse Law Vetted An Important Public Policy.

     The Fifth District in Bickel v. Sunrise Assisted Living, Case No. F062443 (5th Dist. May 21, 2012) (certified for publication) involved a plaintiff suing defendant assisted living facility for elder abuse. Plaintiff entered into a residency agreement with an arbitration clause, with the lower court granting a defense petition to compel arbitration but severing a provision that stated each side would bear their own fees/costs in the arbitration no matter which side prevailed. Eventually, plaintiff prevailed in the arbitration, awarded $666,725.30 in fees and $94,694.70 in costs.

     The severance decision was affirmed on appeal. The primary basis was that the Welfare and Institutions Code section 15657 fee-shifting provision (unilateral in favor of the abused elder) vetted an important public policy of promoting remedial legislation protective of a vulnerable sector of society. In finding that fee recovery in this area could not be waived by an elder, the appellate court applied by analogy the analysis from Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83, 121-122 (2000) (an employment case), concluding that this “heightened” remedy was nonwaivable by the elder.

     See also a related blog post on Bickel at California Mediation and Arbitration.

SLAPP: $120,000 SLAPP Fee Recovery By Defense Affirmed On Appeal After Plaintiff Mall Owner Dismissed Complaint Voluntarily Before SLAPP Motion

 

Owner’s Actions Belied Its Faith In The Merits Of Its Case.

     The Retail Property Trust v. Orange County People For Animals, Case No. G045556 (4th Dist., Div. 3 May 18, 2012) (unpublished) is an interesting decision affirming a $120,000-plus attorney’s fees award against the defense after a Brea mall owner voluntarily dismissed a lawsuit while a SLAPP motion was pending.

     Brea mall owner sued a non-profit group seeking to enforce “time, place, and manner” restrictions for protest activities on the mall property. The defense responded with a SLAPP motion, with mall owner voluntarily dismissing the suit before it could be heard. However, because this dismissal did not prevent an award of mandatory fee award to the defense, the trial court subsequently granted a $120,000 fee award--validating our Mission Statement that fees are often the driving point in litigation.

     Mall owner’s appeal was not successful. The lawsuit seeking to enforce mall owner’s protest restrictions and to obtain an injunction against those activities obviously involved protective SLAPP “free speech” activities. With respect to whether the lawsuit was meritorious or not (the second SLAPP prong), mall owner argued that there was a divergence in appellate decisions on the restriction issue. However, so to speak according to Presiding Justice O’Leary in a 3-0 panel opinion, mall owner “shot itself in the foot” by not arguing that split but showing that it felt that its lawsuit lacked merit by voluntarily dismissing the case (in a way, conceding that the appellate court on one side of the split was correct). Fee recovery affirmed.

In The News . . . . Malpractice Cases On The Rise, Lots Of Mergers/Major U.S. Firm Partnership Profits Up, And Alternative Billing Arrangements Increase

 

     Co-contributor Mike’s father-in-law Tom Basehart keeps his eye in the news on articles of interest for the blog. So, with our thanks to him, here are some gems culled from the recent clippings.

Malpractice Trends:  Up.

     As reported in a February 6, 2012 article in The Wall Street Journal, several legal malpractice insurers say there have been increases in malpractice claims in 2011. A poll of six leading insurers in 2011 found that four of them reported increases of 6% to 20% in claims, according to Ames & Gough Insurance and Risk Management. Not only was the frequency up, but the claim severity was up in the reports.

Law Firm Mergers; Profits Per Partner in Major U.S. Firms:  Up.

     Jennifer Smith, in an article in The Wall Street Journal, reports that law firm mergers are up, with at least 60 mergers occurring in the U.S. and abroad in 2011, the highest level since 2008 and a 54% increase since 2010, according to legal-industry consulting firm Altman Weil Inc. (Unfortunately, the Dewey law firm looks like it will not merge and is in liquidation mode, as numerous news reports chronicle.)

     According to a survey by Hoffman Alvary (a consulting firm), profits per partner increased in 2011 at a 70% clip for the 52 major U.S. firms surveyed. The gains averaged 4.4%.

Wild and Crazy Guys:  Alternative Billing Arrangements.

     An April 9, 2012 article from The Wall Street Journal informs us that alternative billing arrangements (nonhourly; budgeted/full or hybrid contingency cases) are catching on, at least in large law firms. The percentage of revenue from these arrangements is expected to hit 13.4% of revenues for large firms in 2012, nearly double what is was in 2008 according to a Citi Private Bank survey of managing partners from 40 U.S. firms. In a 2011 U.S. general counsel survey by Fulbright & Jaworski of 405 companies, 61% of U.S. general counsel said they used alternative fee arrangements, up from 48% in 2009. GlaxoSmithKline PLC’s general counsel confirms that 63% of the more than $100 million spent by the company each year on outside law firms involves alternative billing arrangements, compared with 3% back in 2008--saving the company tens of millions of dollars.

Arbitration: Parties Waived Right To Return To Arbitration When Failing To Reach A Resolution With Other Parties On Payment Of Nonpaying Parties’ Portion Of Arbitrator Fees

 

     In Cinel v. Christopher, 203 Cal.App.4th 759 (2012), the Second District, Division 1 affirmed a trial court’s order refusing to confirm as an award the arbitrator’s termination of the action for nonpayment of fees of several of the defendants. One party returned to the trial court to compel arbitration, arguing he had paid his fees, but the lower court denied a motion to compel arbitration based on the parties being unable to reach agreement on a fee allocation so that the matter had to proceed to trial.

     This arbitration denial order was affirmed subsequently in Cinel v. Barna, Case No. B232380 (2d Dist., Div. 1 May 18, 2012) (unpublished).

     The appellate court found that the parties’ refusal to agree among themselves to pay the fees of the nonpaying parties waived the right to arbitration given they repudiated it by failing to reach an agreement over division of fees as ordered by the arbitrator and the trial court. Unless the parties agreed to pay the pro rata share of the nonpaying parties per the AAA panel’s order, no arbitration could proceed. Simply, put the party wanting arbitration could not order another party to bear the nonpaying parties’ pro rata share absent an agreement otherwise or absent paying off the nonpaying party’s portion. (Lifescan, Inc. v. Premier Diabetic Servs., 363 F.3d 1010, 1013 (9th Cir. 2004).) Justice Johnson, writing for the 3-0 panel in this case, also would not endorse a result by which no resolution was possible because a party would refuse to pay the nonpaying parties’ portion only to keep coming back and seek successive orders to compel arbitration--something the panel would not countenance because it would amount to an “infinite loop” in delaying resolution. (Sink v. Aden Enterprises, Inc., 352 F.3d 1197, 1199-1201 (9th Cir. 2003).)

     For an additional post on the California Mediation and Arbitration blog, about the earlier Cinel v. Christopher case, click here; for the later Cinel v. Barna case, click here.

Judgment Enforcement: Judgment Debtor’s Motion To Tax Costs Correctly Granted

 

Satisfaction of Judgment Already Having Been Filed Was Big Reason for Affirmance.

     In Shankar v. Chu, Case No. B231701 (2d Dist., Div. 1 May 18, 2012) (unpublished), judgment creditor filed an acknowledgment of satisfaction of judgment and later filed a memorandum of costs after judgment. The trial court refused to set aside the satisfaction of judgment and granted judgment debtor’s motion to tax the judgment creditor’s costs memorandum, prompting an appeal.

     The trial court did not err.

     First of all, judgment debtor’s CCP § 473 motion to allow him to set aside the satisfaction of judgment was improper because he cited no authority indicating the filing of satisfaction of judgment was “a judgment, dismissal, order, or other proceeding taken against him.” Also, the costs memorandum was not timely because it had to be done before a judgment is fully satisfied under CCP § 685.070(b).

Homeowners Associations: HOA Garners About $140,000 In Fees And Costs Against Homeowner Bringing Frivolous Challenge To Board of Director Election

 

Civil Code Section 1363.09(b) Was One Basis For Award.

     Lingle v. Quail Ridge Residential Assn., Case No. A129505 (1st Dist., Div. 4 May 17, 2012) (unpublished) is a case where an HOA prevailed against a homeowner challenging conduct resulting in the election of HOA’s board of directors. Unfortunately for homeowner, the lower court determined that attorney’s fees of $130,868.90 and costs of $9,052.60 should be awarded to HOA as prevailing party under Civil Code section 1354(c) (relating to CC&R enforcement) and Civil Code setion 1363.09(b) (which allows a prevailing party to obtain fees/costs should the court determine the board election challenge was frivolous in nature).

     The appellate court affirmed on both grounds. With respect to the section 1363.09(b) rationale, the appellate court found basis for sustaining it based upon borrowing the frivolity standard from the seminal Title VII case of Christiansburg Garment Co. v. EEOC, 434 U.S. 418, 421 (1978).

Section 998 Two-Fer: One Case Reverses Costs Award Due To Failure To Include Acceptance Acknowledgment And Second Decision Finds Inadequate Record To Overturn Determination That Offer Was Reasonable/In Good Faith For Costs-Shifting Purposes

 

#1: Molle-Johnson v. Anderson, Case No. B228321 (2d Dist., Div. 6 May 17, 2012) (Unpublished).

     In this one, defendant was awarded costs against plaintiff who rejected prior 998 offers of $50,000/$100,000 but was only awarded $2,331 in compensatory damages in a car accident case. This one had to be reversed because the 998 offers lacked the required provision for plaintiff to sign an acceptance acknowledgment, a result necessitated under Puerta v. Torres, 195 Cal.App.4th 1267, 1273 (2011)--a decision emanating from our local Santa Ana appellate court. The 998 offers were invalid. However, defendant was not quite through, arguing the costs award could be affirmed under CCP § 1033. Not so much, said the appellate court, after observing that section 1033 only gives the court discretion to deny costs to a prevailing party, not award them to a defendant. Costs award reversed due to the 998 offer mishap.

#2: Hauzer v. Watson, Case No. F062019 (5th Dist. May 17, 2012) (Unpublished).

     This second case involved a defendant doctor obtaining a medical malpractice defense verdict after plaintiff rejected “walkaway” 998 offers (“I pay you nothing, but waive costs if you agree”) which were served 15 months into the case and after defendant obtained expert witness testimony indicating no standard of due care violation. The lower court hit losing plaintiff with 998 fee-shifting costs of $106,130, consisting largely of $77,527 in expert witness fees. At both the lower and appellate court levels, plaintiff argued the 998 offers were unreasonable/not in good faith, a contention rejected on appeal. The reason for the affirmance is one we have seen many times before--plaintiff failed to provide an adequate record on appeal, only presenting the tax costs declarations, but failing to provide a reporter’s transcript of the trial and hearings so that the appellate court could gauge whether there was any error. Costs award affirmed in this one.

Special Fee Shifting Statutes: Fee Recovery By Successful Bonded Stop Notice Subcontractor Affirmed On Appeal

 

Fact that Winner Did Not Prevail on Mechanic’s Lien Claim Did Not Dilute Stop Notice Win.

     Civil Code section 3176 is a special fee-shifting provision allowing a court to award reasonable attorney’s fees and costs to a bonded stop notice claimant prevailing in any action against an owner or construction lender.

     A bonded stop notice claimant in Griffith Co. v. Spondulix Co., Inc., Case No. F062045 (5th Dist. May 16, 2012) (unpublished) did prevail against defendants on the stop notice claim even after foreclosure of a project and after not winning on the mechanic’s lien claim. The lower court determined that the claimant was the section 3176 prevailing party and awarded the winner both fees and costs.

     The fees/costs awards were affirmed on appeal by the Fifth District. After all, despite losing the mechanic’s lien claim, claimant did win on the stop notice claim so as to be the prevailing party under section 3176. Losing defendants did not establish these awards were unnecessary hardship on them alone--even though they may have had difficulty selling the project due to the pending claims, the claimant suffered hardship in not getting paid. In a very sage observation, the appellate court said: “All parties to litigation suffer hardships over the protracted course of the proceedings . . . .” Aside from that, claimant’s attorney did a good job of providing declaration testimony indicating the requested fees/costs only encompassed stop notice work, leading to an affirmance of the awards in claimant’s favor.

Family Law: Wife Formerly Hit With 271 Sanctions Does Get Another Shot At 2030 Fees After Hiring New Counsel

 

Apparent Transparent Asset/Income Disparity Motivated Appellate Court to Look at the “Big Picture” in Remanding on 2030 Fee Issue.

     We predicted that Alan S.--an opinion from our local Santa Ana appellate court--would be a big one quoted often in the area of when needs-based fees should be awarded under Family Code section 2030. The next case vindicates that prediction.

     In Marriage of Papazian, Case No. A128064 (1st Dist., Div. 2 May 16, 2012) (unpublished), wife got off to a bad start--even though she had a disparate lack of assets/income compared to husband--when she was hit with Family Code section 271 sanctions of $75,000, magnified by an earlier appeal where the appellate court noted that many of her arguments bordered on the frivolous on certain rulings. These determinations tainted her in subsequent proceedings, where the lower court denied her request for needs-based fees under Family Code section 2030 or sanctions under section 271 as against a more well-heeled ex-husband.

     Just to show you that appellate courts can look at the matter with fresh eyes, the appellate court agreed with ex-wife that the lower court abused its discretion in not granting 2030 fees as well as should consider the 271 fee request.

     The reason? Alan S.--you gotta look at the big picture. True, the lower court got distracted by the prior 271 sanctions against wife, but that did not mean she did not need a future level playing field. The “big picture” showed this: wife did not file the litigation, wife hired new counsel not infected with 271 sanction history, wife had no income, wife could not afford an accountant expert, husband did not pay child support for awhile, and husband had substantially more resources. Both the 2030 and 271 requests by wife were remanded for reconsideration, for “big picture” reasons.

Appealability: Appellate Court Refuses To Reach Merits Because No Reporter’s Transcript Of Hearing Provided

 

Forfeiture Was the Result

     Although not dealing directly with an attorney’s fees motion, Suydam v. DirectTV, Inc., Case No. B234887 (2d Dist., Div. 5 May 15, 2012) (unpublished) reminds all appellants or practitioners representing appellants to include reporter’s transcripts of personal proceedings or suitable substitutes in the record on appeal. The failure to provide these transcripts resulted in a summary affirmance based on waiver/inadequate record principles. The decision has a nice listing of cases that have “bounced” appeals for failure to provide an RT/substitute. In the attorney’s fees motion area, here are the two that support the same result: Maria P. v. Riles, 43 Cal.3d 1281, 1295 (1987); Vo v. Las Virgenes Municipal Water Dist., 79 Cal.App.4th 440, 447 (2000).

Deeds Of Trust/Fee Clause Interpretation/Section 1717: Prevailing Lender Either Did Make Sufficient Demand For Payment Of Fees/Costs Or Demand Requirement Excused

 

$101,380 Fee Award Affirmed in Case Where $220,978.34 Monetary Judgment Was Entered Earlier.

     Defendant borrowers lost a judicial foreclosure proceeding, an equitable claim that was bifurcated and heard first by the trial court, to the tune of $220,978.34, plus attorney’s fees and costs based on fee clauses in the operative loan documents. Later, the lower court awarded prevailing plaintiff $101,380 out of a requested $102,490 in fees.

Above:  A foreclosure tale in Iowa in the early 1930s when "the bottom fell out of everything." Military police were on hand to keep farmers from preventing the auction.  1930-1940.  Library of Congress.

     On appeal in Randle v. Defilippis, Case No. A131538 (1st Dist., Div. 2 May 14, 2012) (unpublished), defendants argued that the fee clause required plaintiff to make a pre-suit demand before suing for claims inclusive of fee recovery. The appellate court rejected this argument on two grounds. First, the filing of the judicial foreclosure complaint was a sufficient demand under the circumstances. And, just as important, equitable circumstances govern interpretation of fees clauses, with the record showing that defendants ran up litigation costs based on numerous thin/meritless oppositions or motion work such that any demand would have been an idle act by plaintiff.

     BLOG UNDERVIEW--The second ground also comes into play in the Civil Code section 1717 context, with the Second District, Division 6 in Peak-Las Positas Partners v. Bollag, 172 Cal.App.4th 101 (2009) [reviewed in our March 16, 2009 post] determining that aggressive/tenacious litigation is a proper factor to be weighed in this context.

Appealability: Failure To Include Germane Pleadings And Fee Proceeding Papers Precluded Review Of Attorney’s Fees Award

 

Arbitrator’s $351,470 Fee Award Affirmed Due to Inadequate Record on Appeal.

     Med-Trans Corp. v. City of California City, Case No. F061553 (5th Dist. May 14, 2012) (unpublished) involved an arbitration referee’s of $351,470 in fees and costs after prevailing City defensed a fraud and contractually based claim of plaintiff. (City had requested an award of $414,621.50 in fees and $21,183.50 in costs, but the referee found--after determining that the tort claim had to be defeated for City to prevail on the contract claim--City was not entitled to fees for some unsuccessful maneuvers, was not entitled to a multiplier for a straightforward case, was not entitled to fees for two attorneys appearing at the same court proceeding, and was not entitled to fees incurred after a certain date except for work on the fee petition.)

     Plaintiff appealed, but review was made impossible by an inadequate record. Although providing the referee’s written decision, plaintiff did not supply the complaints, the judgment on pleading, or fee motion papers such that no error could be found by the appellate court. (Hernandez v. California Hospital Medical Center, 78 Cal.App.4th 498, 502 (2000) [inadequate appellate record where appealing party failed to include motion proceeding papers].) So, yet again, we remind you appellants out there to take great pains to designate or compile an adequate appellate record for review by the intermediate (and possibly higher) courts. If not, you will be done in by waiver/forfeiture appellate principles.

Happy Birthday to Us

 

4 Years, Wow!

     To all of our readers, thanks for the support, kind words, feedback, and the like. This blog is four years old, dating back to May 11, 2008. Wow! Happy 4th Birthday.

Will Clayton, photographer.  flickr creative commons license.

Class Actions/Special Fee Shifting Statute/In The News . . . . $1,468,380 In Attorney’s Fees Awarded Against Losing 14 Named Class Members In California Automobile Sales Finance Act Case

 

     Here is an interesting one you do not see too often--named class members having to pay attorney’s fees to the winning defendant.

     On May 9, 2012, MMD Newswire posted that Raceway Ford, Inc. was awarded $1,468,380 in attorney’s fees plus costs as against 14 named class members, jointly and severally, in an automobile retail sales contract backdating class action case. The problem here is that the California Automobile Sales Finance Act has a mutual fee-shifting provision. Since Raceway Ford defeated all claims, it prevailed, much to the chagrin of the named class representatives who are on the hook for fees.

     The fee award was made by Riverside County Superior Court Judge Dallas Holmes (who is retired but still presiding over some matters).

Sanctions: $13,250 CCP § 128.7 Sanctions Award Reversed Where Trial Court Did Not Indicate That Withdrawn Sanctions Motion Was Frivolous Or Without Merit

 

Lack of Findings on Withdrawn Sanctions Motion Was Critical to Reversal.

     In Sverdlin v. Yollin, Case No. B234184 (2d Dist., Div. 5 May 10, 2012) (unpublished), defendant/defendant’s attorneys appealed a CCP § 128.7(c)(1) sanctions award [the equivalent of a F.R.Civ.P. Rule 11] in favor of plaintiff. Good move by the defense/defense attorneys.

     The trial court awarded 128.7 fees and costs of $13,250 rather than the requested $22,138 tally against the defense team. However, it did not consider whether the 128.7 sanctions motion, which was withdrawn, was fraught with frivolity, was unfounded, was filed for an improper purpose, or was unreasonable in nature. Without findings of this nature, the award had to be reversed and remanded for further determination.

Reasonableness Of Fees/Section 1717: Fees Spent On Extraneous Matters Not Entitled To Compensation Where Separate Entities And Separate Case Involved

 

Case Is One Involving Fee Recovery By Public Agency.

     Okay, so a public agency did prevail and recover fees in a dispute in Wilshire Ventures Corp. v. City of San Fernando Redevelopment Agency, Case Nos. B230916/B232924 (2d Dist., Div. 1 May 9, 2012) (unpublished). Public agency was entitled to fees under a written contractual fees clause. However, fee recovery had to be remanded because public agency overreached--it did not show why it should recover for “general education” in a prior case involving separate entities (with no showing that it had a public interest or wider impact in the case before the court) and supervising general counsel for public agency did not really show why this added fee expense should be foisted on the loser (after, all general counsel was not “of record” and billed for expenses in the separate case already discussed).

Requests For Admissions: Incurred Attorney’s Fees, Not Just Reasonable Fees, Is The Standard For Cost-Of-Proof Sanctions

 

Appellate Court Remands Cause to Lower Court For Purposes of Satisfying This Standard.

     Gaskin v. Wegman, Case No. B234124 (2d Dist., Div. 5 May 9, 2012) (unpublished) provides a valuable lesson to all litigators and litigants seeking cost-of-proof “sanctions” under California Code of Civil Procedure section 2033.420. (For a short recap, this is the CCP provision that allows a prevailing party to recover costs of proof, including reasonable attorney’s fees, for proving a material matter that is grounded outside of a reasonable cause for an RFA denial or otherwise having no good reason underlying the denial.)

     That lesson? You gotta read all of the enabling statute which does indicate it is targeted at reasonable expenses actually incurred in making the proof that is the basis of the RFA denial. So, the actually incurred language modifies all expenses, including reasonable attorney’s fees. In this instance, the winning side--which did win a substantial $121,000 fee award--will have to, on remand, present proof of the amount of fees incurred in order to justify an award. Remanded on this basis.

You gotta read.

American mystery novel writer Mary Roberts Rinehart, considered source of the phrase, “The butler did it.”

Library of Congress.

Section 1717: Mutuality Remedy Meant Winning LLC Members Entitled To Fee Recovery Where They Nonsuited Plaintiff

 

Absence of Contract Did Not Defeat Fee Recovery.

     Defendants LLC members nonsuited a case against plaintiff where one of the causes of action was a contract with a fees clause. The trial court denied a request for fees, with defendants appealing.

     They gained a reversal in Choi v. Katofsky, Case No. B232580 (2d Dist., Div. 5 May 9, 2012) (unpublished).

     The reason was simple and based upon Civil Code section 1717. Where the defense defeats a contract claim with a fees clause on the ground it is in nonexistent, that allows the prevailing defendants to recover fees. (Rainier National Bank v. Bodily, 232 Cal.App.3d 83, 86 (1991).) That led to a remand so the defense could seek to recover fees for prevailing below.

Reasonableness Of Fees: Mandatory Labor Code Fees Awarded To Plaintiff Winning Improper Wage Deduction Of $36,000

 

Plaintiff’s Fee Recovery of $291,155 Affirmed, Although 1.5 Requested Multiplier Denied.

     Here is one that again shows how small damages can justify fee awards of an exponential nature, in this case over eight times the successful compensatory recovery.

     Sciborski v. Pacific Bell Directory, Case No. D056440 (4th Dist., Div. 1 May 8, 2012) (partially published; fee discussion not published) was a situation where plaintiff recovered $36,000 in damages in a case subject to a mandatory fee-shifting statute, Labor Code section 218.5. Plaintiff requested $436,732.50, reflecting a lodestar of $291,155 with a 1.5 multiplier.

     The law and motion hearing on the fee request did not start well, with the trial court indicating that the hours spent on the case appeared too high, counsel’s hourly rate was “a lot of money,” and fees charged by attorneys in the community were a general concern. However, plaintiff’s counsel stood his ground and explained the complexity of the case, the contingency risk, defendant’s unwillingness to settle (given a $30,000 offer prior to trial), and defense litigation tactics driving costs up. Although denying the multiplier, the trial court awarded the full $291,155 lodestar.

     The defense appeal of the fee award and plaintiff’s appeal of the multiplier denial were not successful. Defendant could not overcome the abuse of discretion standard governing its appeal, with the appellate court taking special note of the failure to settle and the defense litigation exacerbating tactics. Plaintiff lost because the appellate court was unwilling to weigh the lower court’s assessment of the factors, especially given that the lower court did seem to temper down from some of the remarks during the course of the fee proceeding.

     However, the appellate court generally agrees with the notion that the degree of success is an important factor in evaluating an attorney’s fees request.

Lodestar calculator

Allocation/Fee Clause Interpretation/Section 1717/Reasonableness Of Fees: $158,000 Fee Award Is Result To Winning Defendants In Cremation Intermingling Dispute

 

No Apportionment of Fee Work Required Where Both Contract and Tort Claims Encompassed Within a Broad Fees Clause.

     Above:  Beware the Jabberwock, my son!  Sir John Tenniel, illustrator. 

     Beware of the broadly worded fee clause, because it likely will give rise to fee entitlement no matter whether contract or tort theories are alleged and recovered upon.

     In a cremation intermingling case (including allegations that gold dental filings were held without authorization), the defense prevailed in a dispute where there was a broadly-worded fees clause recovering failure to properly identify or pick up cremated remains.

   Above:  Corpse on funeral pyre, India, 1907.  Library of Congress.

   The language in this clause was broad, allowing the defense to recover fees for prevailing on either contract or tort claims in Warden v. Dudley Hoffman Mortuary, Case No. B229405 (2d Dist., Div. 6 May 7, 2012) (unpublished). The lower court awarded $107,150.09 out of a requested $117,120.09 in trial fees and all of the requested $40,632 in appellate fees for successfully reversing an earlier denial of fees altogether. No apportionment was required given the broad language at issue.

    The billing records submitted by the defense in support of the fee award were sufficiently detailed, showing tasks, the dates of tasks, time involved, and 10-minute incremental billing. Defense counsel also did a smart thing, withdrawing $9,700 in claimed fees for travel time and expenses so as to make the request more palatable to the trial court--something “which, of course, redounded to [losing plaintiff’s benefit]” and expenses reduced by the lower court giving most of the other requests by the defense.

Costs/Equity/Section 998: Second District, Division 6 Affirms Judicial Referee Split And Determination That 998 Offers From Plaintiffs Were Valid For Awarding Costs To Plaintiffs

 

     In a construction defect matter, both sides appealed after a trial court found that judicial referee costs should be split consistent with a judicially-filed stipulation and after making an award of certain statutory costs to plaintiffs after finding that their CCP § 998 offers were valid.

     Both sides were disappointed after the Second District, Division 6 in Antangan v. Shea Homes Limited Partnership, Case Nos. B227527/B230097 (May 7, 2012) (unpublished) affirmed the determinations reached at the trial court level.

Below:  Aerial view of Levittown.  1959.  Wikipedia.

 

In the News/Celebrity Fees -- Halle Berry’s Baby Daddy Requests $500,000 In Attorney’s Fees

. . . And $20,000/Month In Child Support For Sharing Time With Daughter Nahla

     As reported by Nancy Dillon in a May 4, 2012 post in the NYDailyNews.com, Halle Berry’s baby daddy Gabriel Aubry requested a Los Angeles judge to award him $500,000 in attorney’s fees and $20,000 in monthly child support in proceedings involving their custody sharing of time with daughter Nahla. He claims needing this monthly child support amount in order to properly care for his daughter. Ms. Berry has asked permission to move Nahla to Paris with new fiance, French actor Olivier Martinez (once touted as the French “Brad Pitt”), inspired in part to avoid paparazzi stalking (with France supposedly having stronger laws against paparazzi interference). The fee/child support requests were postponed because Mr. Aubry did not have his papers in order, it was reported.

In The News . . . . Litigation Financing Companies Catching On With Top U.S. Firms

 

     As reported in a May 1, 2012 American Bar Association Journal post by Debra Cassens Weiss, more and more top U.S. firms, especially in the plaintiff area, are turning to litigation finance companies to help finance cases for their clients (mainly involving financing of fees and costs). For example, Burford Capital--one of the top finance firms--reportedly is expecting to make $32 million on 9 cases, a 91% return.

“Illustration shows Edward H. Harriman, in the Scottish Highlands, standing with arms and sword raised next to a diamond-shaped rock labeled "Flim Flam Finance" balancing on a pointed base; Harriman is confronting Theodore Roosevelt and his band of Scotsmen, William H. Taft, Charles J. Bonaparte, Frank B. Kellogg, James R. Garfield, and Milton D. Purdy.” Library of Congress.

Probate: Attorney Trustee Does Receive Judicial Acknowledgment That $213,274.18 In Fees Incurred In Defending His Trustee’s Actions Were Justified

 

Sixth District Has a Nice Discussion of Probate Code Provisions Allowing Fee Recovery in Trust Administration Activities (Even After Trustee Is Discharged).

     Estate of Gill, Case No. H03629 (6th Dist. May 4, 2012) (unpublished) is a case where an attorney son trustee had to fight some trust administration diversion claims brought by two of his brother beneficiaries of a parent’s trust. (We bloggers would note that probate and family disputes seem to bring out very poignant emotions in litigants.)

Above:  Wolf attacking animal.  Charles Livingston Bull, artist.  1874-1932.  Library of Congress.

     Trustee son was vindicated when the probate court determined that there was no diversion of trust moneys, eventually awarding him $213,274.18 in attorney’s fees for the trust administration disputes (about a $92,000 or 30% reduction in the requested fees).

     Brothers appealed, but the appellate court said “not so fast,” you did not overcome the hard-to-surmount abuse of discretion review standard for the fee award.

     The appellate court noted that fee entitlement is allowed in numerous Probate Code provisions, including those allowing for attorney’s fees incurred by a trustee after discharge. (See, e.g., §§ 16247, 16243, 15684(a), 15644 [the latter being applicable even after discharge].) The problem for brothers is that they could not show that the fee award was an abuse of discretion, given the findings that had been no misadministration of the trust (meaning the fees were incurred for trust rather than personal purposes) and that the amount awarded after a 30% reduction was some mistake (a claim forfeited by brothers due to the lack of a developed argument on the subject). See Kasperbauer v. Fairfield, 171 Cal.App.4th 229, 234-235 (2009) [abuse of discretion standard applicable].

     BLOG UNDERVIEW--Son was also awarded $123,277 in fees for his personal services over a 17 year span, which totaled about $7,300 per year. Son introduced testimony from a probate referee showing these fees were reasonable, supplemented by the fact that normal trustee 1% administration fees based on the trust corpus would have totalted $510,000. This one shows that some good deeds do not get punished.

 

Prevailing Party/Section 1717/Section 998: Unlicensed Alarm Company Subject To Fee Exposure After Losing To Customer Under Contract With Fee Clause

 

Also, Customer Sent 998 Offer Not Beaten by Alarm Company.

     Justice Fybel, on behalf of a 3-0 panel of our local Santa Ana appellate court in Emergency Technologies, Inc. v. Garcia, Case No. G045685 (4th Dist., Div. 3 May 4, 2012) (unpublished), affirmed a $41,162 fee award to a customer arising out of an alarm company’s attempt to recover $11,343.31. (You know, we sound like a broken record, but here is one where the fee award was almost four times more than the original amount in controversy. It gets worse when you consider the alarm company’s rejection of customer’s 998 offer--but read on to find out what happened. Clients and litigators, unless someone is being unreasonable, have to focus on fee exposure in these contexts; and, if you are going to thrash it out nevertheless, someone needs to talk about Sonoma Risk insurance protection.)

     Above:  The alarm bell on the Court House.  Stockton.  1866.  Library of Congress.

     Alarm company sued customer under a contract with a fees clause for recovery of $11,343.31. Before trial, customer served an unaccepted 998 offer for $3,123.97 plus costs and fees incurred by alarm company before the offer. (Customer showed us that she had an attorney understanding 998 offer calculus.) Well, the problem for alarm company at trial was that it was not a licensed alarm company as required under Business and Professions Code sections 7592 and 7599.34. The lower court found the contract was unenforceable and later awarded customer $41,162 in attorney’s fees, prompting an appeal by alarm company.

     Alarm company was unsuccessful. And, actually, the reason was quite simple: Civil Code section 1717’s “mutuality” rules applies where a contract is found to be unenforceable. Put another way, it does not go POOF!, but the defense on the enforceability of the agreement triggers application of the fees clause. Fee award affirmed, much to the chagrin of the alarm company.

Fees As Damages/Allocation: Fifth District Rules That Attorney’s Fees Expended To Clear Title Are Compensable Slander Of Title Damages Where Slander Contained In Recorded Instrument

 

Dicta in Decision May Be Broader, But No Apportionment Required.

     For all of you real estate buffs out there, we report on the Fifth District’s 76-page decision in Sumner Hill Homeowners’ Assn. v. Rio Mesa Holdings, LLC, Case No. F058617 (5th Dist. Apr. 2, 2012) (certified for partial publication, slander of title fee discussion published), which was a wild fight over subdivision rights by a private community to San Joaquin River access. There are tons of issues for you real estate attorneys--easements, Map Act rights and statute of limitations, and navigable water concerns. Justice Kane wrote a very eloquent decision here on behalf of a 3-0 panel.

     However, for attorney’s fees purposes, the issue under consideration was whether attorney’s fees/costs alone could be compensable damages under a slander of title claim where there was no add-on damages of impairment to vendability. The answer was “yes,” but with a caveat. The appellate court held that attorney’s fees, as damages, were allowable without any proof of vendability impairment in a case where the slander arose from a recorded instrument. Yes, that is the direct holding. We bloggers would argue that the reasoning from this case might be extended more broadly to encompass fees as allowable compensatory damages in any slander of title case, but we do respect the Court of Appeal’s holding which was restricted to “the particular facts of this case.” (Slip Opn., p. 66.) Read it and see if you agree with us that there might be broader implications here.

     The appellate court rejected that any fee apportionment was required, because the jury was instructed on the pros and cons, including the exception that “inextricably intertwined” fee work does not have to apportioned out. Because fees were claimed as damages, this issue was addressed by the jury in the absence of a stipulation for it to be heard by the court. Compensatory damages were $803,951, with punitives of $2,419,800 also being assessed by the jury.

     BLOG UNDERVIEW--Attorney Jerry H. Mann was an expert witness used by plaintiffs, successfully, on the apportionment issue. Co-contributor Mike was a law clerk on the Fifth District with Jerry quite a while ago, with Jerry staying in Fresno to build his practice. Mike sends his greetings.

Allocation/Section 1717: Even Though Two Distinct Contracts Existed (With Only One Subject To A Fees Clause), All Fees Were Recoverable Because Work Related To Defensing The Nonrecoverable Oral Contract Claim Was Essential To Resolving The Recoverable Wri

 

No Allocation Required, Resulting in Affirmance of $318,469.82 Fee Award Where Jury Awarded Winner $71,443 In Compensatory Damages.

    Rens Masonry, Inc. v. Luca Properties, Inc., Case No. D057698 (4th Dist., Div. 1 May 1, 2012) (unpublished) is an interesting decision which affirmed a $318,469.32 fee award to the winning plaintiff contractor after the jury verdict hit the defendant owner with a $71,443 compensatory damages in favor of contractor. (Yep, you heard right -- the fee award was over four times the amount in controversy.)

    The facts were that contractor was hired under a written contract with owner to construct foundation walls, later agreeing under a distinct oral contract to also construct a fireplace for the owner. The written contract included a written prevailing party fees clause. Contractor sued owner for money owed on the construction of both components, with owner raising an offset defense for defective construction of the fireplace and filing a cross-action for breach of contract based on the allegedly faulty fireplace. Important for this case, we surmise, is the fact that owner sought to recoup $11,045 in offsetting damages for the fireplace, which exceeded the $5,924 oral contract claim by contractor on this discrete component. The jury awarded contractor the “full monty” of $71,443 for masonry work relating to both the foundation walls and fireplace. The jury agreed that there were distinct contracts, but rejected the offset defense and cross-claims by owner.

     That brings us to what we focus on: the fee award. Contractor requested all of the fees, with owner saying “no fair,” you gotta apportion out any fees on the oral contract time for the fireplace construction given the absence of a fees clause for the oral “deal.” However, the lower court rejected that contention and awarded full fees for the entire trial to contractor in the amount of $318,469.82.

     Owner appealed, reiterating the apportionment argument made below. The appellate court did not find it persuasive either, determining that the fireplace issue was an offset/set-off to the entire claimed damages such that the work on it was essential to obtaining recovery on the written contract damage claim. In other words, defeating a defense to the contract cause of action is compensable and does not require apportionment where a litigant sought an offset that would impact the damages to be awarded under the recoverable written contract claim subject to the fees clause. (Siligo v. Castellucci, 21 Cal.App.4th 873, 876-880 (1994).) Subtle distinction, but one that was determinative in this particular appeal--where the fee award was over four times the amount in controversy. (Not to beat a dead horse, but look at our Mission Statement and choose carefully to sue rather than attempt to resolve a dispute informally when there is fee exposure. If not, you better tell your clients to investigate the insurance protection provided by Sonoma Risk.)

In The News . . . . Idaho U.S. Magistrate Judge Rules DOJ Must Pay $2.24 Million in Fees And Costs To Plaintiffs’ Counsel In Dispute Over Property Worth $883,000

 

    We thank The Blog of Legal Times for pointing us to a recent article in The National Law Journal on a fees/costs ruling in an Idaho federal case.

     There, an Idaho U.S. magistrate judge recently ruled that Department of Justice would pay $2.24 million in legal fees and costs to plaintiffs’ attorneys in an Idaho property railroad right-of-way case involving property worth $883,000. DOJ had argued for an award of $685,000, while plaintiffs requested $2.4 million. The case had been on-going for about 10 years. One of plaintiffs’ counsel estimated that both sides had expended total fees and costs of about $4 million on taxpayers’ “dimes” to litigate this case over the $883,000 right-of-way.

Arbitration/Estoppel: Judicial Estoppel Puts The Kabosh On Appeal Claiming Fees Clause Did Not Cover Fees Incurred In Court Proceedings To Confirm Arbitration Award

 

Court of Appeal Was Not Pleased With Appellant’s Inconsistent Positions.

      Judicial estoppel is an equitable doctrine aimed at preventing litigants from taking two totally inconsistent positions in different phases of litigation--or prevent “playing fast and loose” with the judicial system or “gaming the system” by taking such inconsistent positions. (Uhrich v. State Farm Fire & Cas. Co., 109 Cal.App.4th 598, 613 (2003); Rapture Shipping, Ltd. v. Allround Fuel Trading B.V., 350 F.Supp.2d 369, 373 (S.D.N.Y. 2004).) That doctrine did prevent appellant from doing that in a second appeal in an effort to avoid a substantial fee award levied after appellant lost in arbitration/post-award confirmation proceedings.

     In New England Elec. Wire Corp. v. Cooner Sales Co., LLC, Case No. B231081 (2d Dist., Div. 2 Apr. 30, 2012) (unpublished), appellant--emboldened by some prior trial court wins in previous arbitration rounds and post-award enforcement proceedings--filed pleadings indicating that it was the prevailing party entitled to fees in both arbitration and post-arbitration judicial proceedings, going so far to say that the intent of the contractual fees clause was clear. Unfortunately for appellant later, the opponent became the winner after subsequent rounds and post-arbitration proceedings, with the lower court awarding opponent $804,184 in attorney’s fees plus another $44,615 for a prior meritless appeal. In the fee battle, appellant claimed that the fees clause did not cover the requested fees, something the lower court rejected.

     What did appellant then do? Appealed again, iterating that there was no fee entitlement because the fees clause did not authorize any fees incurred during judicial proceedings.

     The appellate court was not impressed. Applying the doctrine of judicial estoppel, it found that there was no way to square the inconsistency in positions, especially since contractual intent “exists at the time the contract is formed: it does not change from year to year. Once appellants announced their contractual intent in the first appeal, they were not free to invent an entirely inconsistent contractual intent in a later appeal.” (Slip Opn., pp. 8-9.)

     But that was not all. Although affirming the fee award, the appellate court remanded to the lower court to determine the amount of fees and costs to be awarded to respondent for legal services rendered on the second appeal.