CALIFORNIA ATTORNEY'S FEES

Family Law: Ex-Wife Properly Denied Attorney’s Fees Where No Statutory Basis Provided To Award Fees In Child Support Modification Proceeding

 

Wife Only Cited to a Family Code Provision Relating to Enforcement of an Existing Child Support Order, Not a Modification Situation.

     In Bennett v. Foss, Case Nos. A137452/A138342 (1^st Dist., Div. 1 Apr. 29, 2014) (unpublished), ex-wife did obtain reversal of a child support modification order on appeal. However, in the lower court, she had also asked for an award of attorney’s fees under Family Code section 3557, which does allow for a fee award to level the playing field in a proceeding to enforce an existing child support order. Here, however, that section did not apply because this was a child support modification proceeding, with the lower court properly finding the lack of fee entitlement under section 3557. The appellate court did drop a footnote indicating it was not expressing an opinion on whether another fee entitlement basis might not be available. (BLOG HINT—Some research into Family Code section 2030 or 3652 might have been helpful here, for both sides.)

Insurance: Carrier Obtaining Reimbursement Of All Defense Costs Against Insured Had Some Of It Taken Away On Appeal Because Only Subsequent Facts Showed No Potential For Coverage

 

Defense Costs Were Properly Paid by Carrier Until Subsequent Investigation Showed No Coverage Potential.

     Insured must be breathing somewhat easier after the appellate result in Certain Underwriters at Lloyd’s London v. Mestmaker, Case No. F066016 (5^th Dist. Apr. 29, 2014) (unpublished), which reviewed a lower judge order directing the insured to pay back $235,958.98 in fees/costs expended by carrier in defending insured in a Colorado federal court action. The trial judge determined that there was no potential for coverage such that carrier had no obligation to defend, meaning insured had to reimburse off of the principal of advanced fees/expenses (plus interest thereon).

     On appeal, this one got reversed. The reason was that the facts demonstrated that the “no coverage” scenario was only evident based on subsequently developed facts, which translated to defense costs only ceasing on a prospective basis from the point these facts became known. (Tamrac, Inc. v. CIGA, 63 Cal.App.4^th 751, 758 (1998).) So, the matter was remanded for the trial judge to determine what defense costs needed to be reimbursed from the point in time where the potential for coverage was discovered to be non-existent.

Costs: Costs Paid By Fictitiously Named Defendants Had To Be Deleted From Costs Judgment

 

Only Routine Costs for Filing/Motion Fees for Nonfictitously-Named Defendant Was Properly Assessed Against Plaintiff.

     The appellate court in Lashgari v. Chen, Case No. D063300 (4^th Dist., Div. 1 Apr. 29, 2014) (unpublished), on appeal, deleted $435 from recoverable costs in filing/motion fees paid by two fictitiously named counterparts of a nonfictitious defendant as being in effect “double dipping” such that defendant should have to pay the effectively duplicative expenses.

     So does the superior court get to keep the duplicative filing fees overpaid by defendant?

Section 998: Lack Of Acceptance Signature Line Or Distinct Notice Of Acceptance Document Did Not Invalidate Defense 998 Offer

 

The Result Was Plaintiff Was Liable for $46,115.76 In Postjudgment Costs/Expert Fees After Deduction Of $8,620 Net Jury Award.

     CCP § 998 offers that are rejected but not beaten at trial can be very cruel reversals of fortune even if a positive jury verdict is obtained. In this personal injury case, plaintiff obtained only a $8,620 net jury verdict after rejecting respective defense 998 offers of $12,001 and later $40,001. The trial judge then awarded the defense $54,735.76 in postjudgment costs (mainly expert fees), which meant plaintiff had to pay the defense $46,115.76 after getting credit for the jury verdict amount.

     Plaintiff’s appeal of the costs order was unsuccessful in Dubord v. Deluca, Case Nos. D063254/D063841 (4^th Dist., Div. 1 Apr. 29, 2014) (unpublished).

     Plaintiff argued that the first $12,001 offer was invalid because there was no acceptance signature line or separate Notice of Acceptance document attached to the offer. The 4/1 DCA panel rejected this argument, finding persuasive the 4/3 DCA’s reasoning in Rouland v. Pacific Specialty Ins. Co., 220 Cal.App.4^th 280, 287 (2013) [discussed in our October 15, 2013 post; authored by Justice Aronson]—which found no magic formatting was needed where there was some acceptance language in the offer. The second offer’s validity did not need to be considered because the first offer was not rendered inconsequential and was indeed basis alone for cost-shifting in favor of the defense.

Lodestar/Probate/Section 1717/Substantiation Of Fees: Court Affirms Fee Award On Fiduciary Duty Claims As Arising On Contract, Denies Fee Request Against Trustee Whose Opposition Was Not Frivolous, And Remands Lodestar Calculation

Looks Like Decades Trust Disputes Are Drawing To An End.

     Holt v. Denholm, Case Nos. G045496 and G046293 (4^th Dist., Div. 3 Apr. 28, 2014) (unpublished)—both authored by Presiding Justice O’Leary--are two appeals involving cross-over probate and Civil Code section 1717 issues in a long-running battle between different sides of a family trust—pitting a former trustee/beneficiary (and related businesses and business partners) against other beneficiaries. On the whole, the two appeals resulted in a mixed bag of rulings all around (most of which were affirmed), not to mention a lot of attorney’s fees and other expenses.

     Appeal #1 involved some beneficiaries (the Holts) filing suits challenging the conduct of trustee/beneficiary Denholm. However, the Holts sued one of Denholm’s businesses and one of his business partners (both of which were LLCs, and had operating agreements of which the Trust was an LLC member), with the Holts claiming that they were owed fiduciary duties based on Trust LLC membership duties. The LLCs were dismissed and awarded $479,164.25 in fees against the Holts based on the LLC operating agreement fee clauses. Although claiming that the breach of fiduciary claims were not “on the contract” under Civil Code section 1717, the appellate court’s examination of the LLC membership/operating duties as flushed out in the pleadings and litigation claims showed that they did arise from the contract so as to give rise to 1717 exposure. Fee award affirmed in appeal #1.

     Appeal #2 involved several challenges: (a) Holts’ denial of obtaining fees against trustee Denholm under Probate Code section 17211(b), which does allow fee recovery if a trustee in bad faith contests challenges to an accounting; (b) a Denholm-related LLC (CALCO) obtaining a fee award under Civil Code section 1717 on the same grounds as the two LLCs retaining an award in Appeal #1, with the Holts complaining; and (c) CALCO’s argument that the $21,333 fee award was inadequate given its underpinning was a simple formula with no relation to proper lodestar analysis. Holts lost the argument that they should obtain fees against trustee Denholm, because he defeated 5 causes of action and his opposition to their suit was not frivolous as required under section 17211(b). (Uzyel v. Kadish, 188 Cal.App.4^th 868, 928, 928 n. 48 (2010).) CALCO’s entitlement to a 1717 award tracked the same basis as the award on breach of fiduciary claims in Appeal #1. Holts argued that CALCO’s fee substantiation was inadequate, but the appellate court rejected the notion that bills and time sheets had to be provided in addition to submitted billing statements. However, CALCO’s award was reversed and remanded to use lodestar analysis rather than the lower court’s application of a 1/44 ratio grounded in the number of litigation players involved. The lower court was instructed to look at hours expended, prevailing hourly rates, equitable considerations, nature of the litigation, and skilled required, all the normal lodestar issues rather than resort to a formulaic approach.

Private Attorney General: Unsuccessful Litigant Below Could Not Transform Itself Into Successful Party For Purposes Of Obtaining CCP § 1021.5 Fees On Appeal

 

Loser Below Cannot Be 1021.5 Successful Party.

    Prospector blowing on pan of fine dirt which contains particles of gold. Russell Lee, photographer.  1940.  Library of Congress.

     This is what we would call a chutzpah appeal. A business purchasing gold from individuals protested County of Department of Weight and Measures’ claims that the business had to have County-certified scales, losing at the administrative level and in failing to convince a lower court to do otherwise in a mandamus writ proceeding. However, on appeal, losing business—also losing the appeal on the merits—argued it was entitled to fees for appellate efforts in vindicating public interests under CCP § 1021.5. The appellate court, in East Valley Pawn v. San Bernardino County Dept. of Agriculture Weights and Measures, Case No. E056243 (4^th Dist., Div. 2 Apr. 28, 2014) (unpublished) had no problem rejecting this argument because, after all, appealing litigant was not successful—with success being a premise to a 1021.5 fee award.

Arbitration: Second District, Division Four, Affirms Judgment Confirming Attorney’s Fees Award And Liquidated Damages Against Attorney

The Arbitrator’s Award Assessing Fees, Costs, And Expenses Ran Only Against The Attorney, Not The Client

     The highly deferential standard of review given to an arbitrator’s award, encompassing as it does the arbitrator’s resolution of questions of law or fact, largely explains the result in Kaufman v. Diskeeper Corporation, B247315 (2nd Dist. Div. 4 April 28, 2014) (Manella, Epstein, Willhite) (unpublished).  See today’s post on California Mediation and Arbitration.  In Kaufman, the Court of Appeal affirmed the trial court’s confirmation of an arbitrator’s award – an award assessing liquidated damages of $70,000, attorney’s fees of $297,000 and costs against attorney/appellant Kaufman.

     The arbitrator had agreed with Diskeeper that the attorney violated confidentiality provisions in a settlement agreement containing a liquidated damages provision.  Believing it would be inequitable to award fees, costs, and expenses against the client because of the attorney’s acts, the arbitrator assessed fees, costs, and expenses only against the attorney. 

     Attorney argued on appeal that he was not a party to the liquidated damages provision of the settlement agreement.  The arbitrator, however, had concluded that the attorney had signed the settlement agreement, agreeing to be bound by its non-disclosure terms, which terms the arbitrator held to encompass the liquidated damages terms.  Furthermore, the Court of Appeal concluded that appellant forfeited the argument that he was not a party to the liquidated damages provision by not raising it before the arbitrator.

     As to the attorney’s fees award, the arbitrator relied on two independent grounds:  first, that the attorney “engaged in negligent representation” when he assured Diskeeper that all documents had been returned; second, that the attorney was contractually bound by the fee provision.

     Attorney argued that American jurisprudence does not allow an award of attorney’s fees for “negligent representation.”  The Court of Appeal did not, however, have to reach that issue, finding instead that the attorney, having signed the settlement agreement, had agreed to be bound by the relevant fee provision.  Although the arbitrator’s “determination is beyond our review,” the Court of Appeal weighed in, “we would regard it as reasonable were we to examine it.”

     TIP:  If there is a lesson here for attorneys it is:  be wary about agreeing to be bound by the settlement agreement.

Off Topic: Recent 2/6 DCA Opinion Has Nice Summary Of Appellate Review Standards

 

It Also Has A Good Discussion of the Difference Between Holdings and Dicta.

      Although not involving fee issues, we had to share two aspects of Justice Yegan’s eloquently written opinion in Marriage of Boswell, Case No. B249141 (2d Dist., Div. 6 Apr. 28, 2014) (published).

     The first aspect was a summary of appellate review standards. “Mother has no appreciation for the rules on appeal, i.e. the substantial evidence rule and the rules relating to the exercise of discretion by the trial court and the review thereof by the Court of Appeal. (Estate of Gilkison, [] 65 Cal.App.4^th [1443,] at pp.1448-1449) These rules are well known. They need not be repeated. We hold that, where, as here, the family law court makes a fair and equitable ruling on contested issues of fact, its express or implied factual determinations, are binding on appeal. The appellate court may not substitute its discretion for that of the trial court unless the appellant can demonstrate, as a matter of law, that the trial court’s judgment is arbitrary, capricious, whimsical, or exceeds the bounds of reason. (Id. at pp. l448- l449.)” At another point, he wrote: “We do not judge credibility on appeal. An adverse factual finding is a poor platform upon which to predicate reversible error. ([Marriage of Greenberg (2011) 194 Cal.App.4^th 1095,] at p. 1097.) ‘We sit as a court [of law] to review errors of law and not [claimed] errors of fact.’ (Achen v. Pepsi-Cola Bottling Co. (1951) 105 Cal.App.2d 113, 125.)”

     The second aspect is a nice discussion of the difference between holdings and dicta—you will enjoy it.

In The News . . . Recent Article Chronicles Class Action Securities Fee Costs In Federal Litigation; Patent Troll Pending Legislation Contains Prevailing Party Fee Shifting Provisions; and New York Supreme Court Sanctions Plaintiff’s Counsel $10,000

 

Feb. 2014 The Business Lawyer Article by Professor Grundfest Shows Fees Obtained By Class Counsel and Defense Counsel in Federal Securities Class Actions.

     Joseph A. Grundfest has written an interesting article in the February 2014 edition of the ABA’s The Business Lawyer, calling for a reexamination of the basic presumption of reliance and damages elements in 10b-5 federal class action suits. Although the article is likely to be controversial on an overall basis, what caught our eye were statistics about the fees earned by plaintiff’s lawyer and defense counsel in securities class action settlements. Here you go: between 1997 and 2013, plaintiffs’ lawyers earned more than $14 billion in fees and expenses in securities class action settlements (somewhere around 32% of the settlement amounts per case), while defense expenditures were often 25-30% of the settlement amount.

Patent Troll Legislation Does Have Fee-Shifting Aspects.

     Aaron Charfoos, an attorney in the intellectual property department of Dykema’s Chicago office, has written an April 24, 2014 post on The Metropolitan Corporate Counsel describing features of the pending legislation to curb perceived abuses relating to patent litigation brought by nonpracticing entities (NPEs, also known as “patent trolls”). First, the statistics: 28% of corporate general counsels express that i.p./patent litigation is a major concern for them according to a recent Norton Rose Fulbright study (up from just 19% in 2012). Second, the pending federal legislation would award attorney’s fees and costs to the prevailing party unless the nonprevailing party was either reasonably or substantially justified in its litigation conduct during the course of the particular case.

New York SLAPP Case Resulted in $10,000 Sanctions Against Losing Plaintiff’s Attorney Based On Filing Frivolous Suit.

     An April 25, 2014 post on The Volokh Conspiracy blog discussed Bennett v. Towers, 2014 NY Slip Op. 24059 (N.Y. Supreme Court, Nassau County Mar. 13, 2014), where tortious interference/defamation claims were dismissed under New York’s SLAPP statute because defendant’s conduct was absolutely privileged in opposing a subdivision request in a public hearing. The court found the plaintiff’s suit was frivolous, and sanctioned plaintiff’s attorney $10,000, reserving the defense fees and costs which should be awarded to the prevailing defendant. Although Mr. Volokh was somewhat concerned that the sanctions were not higher, New York law is different than California’s SLAPP scheme and interpretative case law—with California, at the present, not allowing attorney’s fees or sanctions to be imposed against the losing plaintiff’s attorney. (See Moore v. Kaufman, 189 Cal.App.4^th 604, 614 (2010); Lenk v. Nguyen, 2d Dist., Div. 4 unpublished case discussed in our November 13, 2010 post.)

Fee Clause Interpretation/Section 1717: Party Under Merger Agreement Was Not Entitled To Fees Against Losing Party Under Separate Agreement (Not The Merger Agreement) With No Fees Clause Or Third Party Beneficiary Status

 

Agreements Were Unambiguous, Not Allowing For Fee Recovery.

     Where contracts with no extrinsic conflicts are involved, appellate courts will construe agreements by their terms—no fees clause, no fee recovery..

     That is what happened in Sznyter v. Spun.com, Inc., Case No. D061832 (4^th Dist., Div. 1 Apr. 25, 2014) (unpublished).

     The basics are that plaintiff lost a bid in a repurchase share dispute because the defendant company had engaged in a prior corporate merger (with notice) and had no shares to repurchase—an impossibility situation accepted by the lower court. Then, defendant company moved to recoup attorney’s fees under the merger agreement clause even though plaintiff was not a signatory to it. The fee request was denied.

     Company cross-appealed on the fee denial, but did not do any better at the intermediate appellate review stage. Plaintiff was never seeking to do anything relating to the merger agreement with a fees clause; rather, he was dealing with a separate contract with no fees clause—meaning defendant company could not recover in any event under either agreement. However, the merger agreement fees clause was narrow also, such that it could not be interpreted to provide third party beneficiary status to losing plaintiff much less defendant company seeking fees. Fee denial sustained.

Probate: Probate Judge’s Awarding Former Trustee Only $27,256 Of Requested $77,415.80 In Claimed Trustee/Attorney’s Fees Was No Abuse Of Discretion

 

Much of Time Was On Behalf of the Trustee In His Individual Capacity.

     In the probate area, a trustee’s recovery of reasonable counsel fees for defending against a beneficiary’s claims is reimbursable if they are incurred in good faith and if they are for the benefit of the trust rather than the trustee individually. (Whittlesey v. Aiello, 104 Cal.App.4^th 1221, 1227, 1230 (2002); Donahue v. Donahue, 182 Cal.App.4^th 259, 269 (2010).)

     These principles justified a probate judge only awarding a former trustee $27,256 out of requested $77,415.80 trustee/attorney’s fees in Hall v. McBride, Case No. H037941 (6^th Dist. Apr. 24, 2014) (unpublished).

     Trustee’s real problem was the failure to surmount the abuse of discretion standard relating to fee awards. Although trustee seemed to be doing well at the start, a new judge viewed with displeasure mounting fee requests and cut them unlike the predecessor judge. Many, many requested fees were reduced greatly because the requests involved civil harassment/elder abuse disputes advanced only against the trustee in his individual capacity. The reduced fee award was affirmed on appeal given the leeway granted to probate judges to “do equity” in crafting fee orders.

Appealability: Lack Of A Final Judgment Dismissing Action Meant Subsequent Fee Ruling Nonappealable

 

Appeal Dismissed Because No Postjudgment Order Involved.

     As Justice Ikola recognized in Martin v. My Car Agent, Case No. G048985 (4^th Dist., Div. 3 Apr. 24, 2014) (unpublished), order appealability is a jurisdictional concern of the first instance for a reviewing court—black or white, not shades of grey. In this one, the appeal of an order granting plaintiff fees (awarding $32,581 rather than the requested $262,000 by plaintiff) was dismissed. The reason was simple: there was no earlier judgment dismissing the action, which means the fee ruling was not a post-judgment order which was appealable in nature.

Laffey Matrix: DKN Holdings Decision Just Published

 

U.S. Attorney’s Office Laffey Matrix Not Binding On State Courts In Determining Hourly Rates.

     On April 9, 2014, we posted on DKN Holdings, LLC v. Faerler, a Fourth District, Division Two unpublished decision finding that the U.S. Attorney’s Office Laffey Matrix (developed for the D.C. area) was not binding on state courts when determining reasonable hourly rates for state court practitioners in fee contests. We can now report that this decision was published on April 25, 2014, keeping in mind that the 4/2 DCA is usually the most conservative intermediate appellate court when it comes to publication.

Cases Under Review: Elder Abuse/Judgment Enforcement Conflicting Scheme Fee Case Set For California Supreme Court Argument In May 2014

 

May 7 Is Scheduled Argument Date.

     We can now report that a fee case involving a conflicting battle between the Elder Abuse and Judgment Enforcement statutory schemes--Conservatorship of the Estate of McQueen (Ida) Taye (Fessha) v. Reed (Carol Veres), S209376 (Poochigian, J., assigned justice pro tempore)—has been scheduled for argument before the California Supreme Court on May 7, 2014 at 1:30 p.m.

     Here is the state supreme court’s issue synopsis on the matter:

“#13-43 Conservatorship of the Estate of McQueen (Ida) Taye (Fessha) v. Reed (Carol Veres), S209376. (A134337; nonpublished opinion; Superior Court of Alameda County; HP05237122.) Petition for review after the Court of Appeal reversed an order granting a motion for post- judgment attorney fees and costs. This case presents the following issue: Is a trial court award of statutorily-mandated fees and costs incurred on appeal subject to the Enforcement of Judgments Statutes (Code Civ. Proc., § 685.040 et seq.) if the statutory authority underlying the award is the Elder Abuse Act (Welf. & Inst. Code, § 15600 et seq.)?”

News: Since Thursday Last Week Typepad Has Been Besieged By A Distributed Denial-Of-Service Attack, Affecting Our Blog, And Countless Others

GRRRRRRRRR . . . .

     If you are reading this post, we thank you for your loyalty! 

     Since last week, our internet platform, the usually very reliable Typepad, owned by SAY Media, has been subjected to a “distributed denial-of-service attack.”

     A DDOS attack is intended to make a network resource unavailable to intended users.  A coordinated effort is made to overwhelm the webservers – as if everyone sitting around the dinner table conspired to reach with their forks for the steak at the same moment.

     As bloggers, we find the resulting chaos here and under these circumstances to be enormously frustrating and unfair.  A DDOS attack allows a small number of persons to disrupt the free speech of thousands, perhaps millions, of writers and readers.

     DDOS attacks have sometimes been compared to “virtual sit-ins” or “Internet Street Protests” – especially when they invade a politicized target, be it the New York Stock Exchange, or a despised bank.

      But why attack Typepad, of all targets?  Attacking Typepad, which is a vehicle for free speech that reaches millions, is impossible for us to see as any legitimate political protest.  Do the attackers simply want to shakedown SAY Media for ransom?

      Individual bloggers are powerless to do anything about such an attack, because a DDOS attack reveals a systemic problem with the use and abuse of internet resources – a problem that simply cannot be solved at the individual level.

     We hope that SAY Media will invest significant resources to develop security measures that make such attacks less disruptive in the future.  Such an investment is essential to preserve the extraordinary value that Typepad provides to its owners, to its customers, and to the readers of blogs hosted by Typepad.     

     BLOG BONUS:  Wikipedia defines a DOS or DDOS attack as follows:

     “In computing, a denial-of-service (DoS) or distributed denial-of-service (DDoS) attack is an attempt to make a machine or network resource unavailable to its intended users. Although the means to carry out, motives for, and targets of a DoS attack may vary, it generally consists of efforts to temporarily or indefinitely interrupt or suspend services of a host connected to the Internet. As clarification, DDoS (Distributed Denial of Service) attacks are sent by two or more persons, or bots. (See botnet) DoS (Denial of Service) attacks are sent by one person or system.”

Family Law: Family Code Section 1101(g) Allows For Fee Sanctions As Well As Award Of Undisclosed Asset Value

 

Statutory Language Allows Both To Be Imposed.

     The family law judge in Marriage of O’Connell, Case No. G047362 (4^th Dist., Div. 3 Apr. 22, 2014) (unpublished) imposed $62,903 in sanctions as well as awarded one-half of undisclosed financial accounts in favor of wife and against husband under Family Code section 1101(g). Husband argued this was “double-dipping,” but the appellate court disagreed because the statutory language indicated that the court penalty “include[d], but was not limited to” this remedy. This “not limited to” language demonstrated the family judge could go farther by awarding sanctions on top, as the lower court properly did in the case before it. Justice Ikola authored this decision.

Requests For Admission: Denial Of Postjudgment Fees Was Error Where Plaintiff Made Stipulation Which Tacitly Demonstrated That RFA Denial Might Have Been Unjustified

 

Remand In Order to See If Any Exceptions Applied.

     In Mobasser v. Yermian, Case No. B247269 (2d Dist., Div. 7 Apr. 22, 2014) (unpublished), defendant appealed a lower court’s refusal to award $22,408 in postjudgment attorney’s fees based on plaintiff’s denial of a request for admission that plaintiff was not an employee. CCP § 2033.420 allows fee-shifting if an RFA denial was not justified and a requesting party can show the fees were causally attributable to the denial.

     The defense won a remand on this issue. Plaintiff did stipulate that he was a partner deep into the litigation, which the appellate court construed as a tacit concession that he was not an employee. Even though no jury verdict was reached on the issue, the defense did have to present proof and a remand was in order to see if the RFA denial was justified so as to prevent fee-shifting in a post-appeal proceeding.

In The News . . . San Antonio Attorney Forges Judge’s Signature To Court-Appointed Attorney’s Fees Orders

 

We Don’t Advise It, Unless You Want Jail Time.

     Lubbock, Texas.  “Poochy”.  1942.  Library of Congress.

     Here is one way of collecting fees we don’t advise doing.

     San Antonio attorney Hilda Valadez pleaded guilty in March of this year to criminal fraud charges of forging a judge’s signature on orders showing she had performed services justifying her to court-appointed attorney’s fees in certain cases (indigent criminal matters). Of course, she had not performed most of the services, with one official in the Texas county auditor’s office saying Ms. Valadez was improperly paid $594,639 in fees between 2008 and 2011.

     The price for this behavior? 10 years in state prison, ruled a Texas judge presiding over the criminal case. The judge indicated that restitution of the improperly taken funds would influence his probationary review of the matter along the way.

Reasonableness Of Fees: Fees For Collateral Actions And Hourly Rates Sought By Prevailing Party Were Reasonable In Nature

 

Discounted Rates of $150-260 in Riverside Were Just Fine.

     Defendant promising to sell certain property to a plaintiff governmental entity for $8.42 million, with some environmental contamination holdback provisions, lost a specific performance suit in Riverside County Transportation Commission v. Liston Brick Co. of Corona, Case No. E054980 (4^th Dist., Div. 2 Apr. 21, 2014) (unpublished). Also, defendant was hit with contractual attorney’s fees of either $335,660.90 or $355,660.90 (the opinion is unclear), the full request of the winning plaintiff.

    Brick samples.  D’Hanis Brick Works, TX.  Library of Congress.

     The defense appeal of the fee award was not successful.

     Defendant challenged awarding almost $97,000 in requested fees for administrative/regulatory activities and for a right to entry petition to enter the property for purposes of undertaking environmental due diligence. The appellate court found that these were justifiable collateral activities closely related and useful in the pending action. (Children’s Hosp. & Med. Center v. Bonta, 97 Cal.App.4^th 740, 779-780 (2002).) The amount of fees requested was reasonable, given that the supporting declaration indicated hourly rates ranged from $150 for summer associates to $260 for partners in a Riverside firm—up to 45% discounts in many published hourly rates.

Class Action/Common Fund: Reasoning By N.D. California District Judge Might Aid State Court Practitioners Arguing Percentage Of Fund, Rather Than Lodestar, Should Be The Approach In Common Fund Cases Even At The State Level

 

Around $13.25 Million, 25% Of $53 Million Settlement Fund (After Deducting Class Action Administration Expenses), Is Awarded To Class Counsel.

     Generally, California uses the lodestar as the fee-setting approach in the class action context, “cross-checked” by the percentage of recovery approach. However, reasoning by U.S. District Judge Richard Seeborg in his fee award in In re Apple iPhone/IPad Warranty Litigation, Case No. C 10-1610-RS (N.D. Cal., Doc. No. 146 Apr. 14, 2014) may provide future assistance to California state court practitioners urging that the percentage of fund, rather than lodestar, approach should be used in settlements involving a common fund.

     The litigation arose out of class claims that Apple had improperly denied warranty coverage to iPhone and iPad users relating to a faulty liquid submersion indicator. Eventually, a settlement was hammered out between Apple and the class by which a $53 settlement fund was created, with about 132,000 class members getting an average of $211 per device (full or more than full replacement value) and another 43,000 class members receiving different payments depending on the verifications they could produce.

     Plaintiffs’ attorneys sought to recoup $15.9 million, which would be 30% of the settlement fund. Apple gasped and said only $8.78 million was reasonable, arguing that the lodestar formulation under California law had to be used and resulted in a much smaller fee award.

     District Judge Seeborg, after observing that the Ninth Circuit allows district judges to use either the lodestar or percentage of fund approach (In re Bluetooth, 654 F.3d 935, 942 (9^th Cir. 2001)), awarded 25% of the settlement fund based on a Ninth Circuit benchmark delineated in prior decisions. So, plaintiffs’ counsel received a little under $13.25 million, because the 25% was the number after deduction of class action settlement administration expenses.

     After a scholarly survey of California state jurisprudence on the subject, he found that California law did not absolutely require use of the lodestar approach where a common fund was involved—opting to use the percentage of fund approach because the lodestar would not have resulted in a $13.25 million award which he deemed in order.

     This decision is interesting reading for state court practitioners who would like to urge that state jurists use the percentage of recovery as the fee approach in common fund cases.

Social Security: Social Security Disability Claimant Winning Remand Erroneously Denied Attorney’s Fees Under EAJA By District Court

 

Government’s Position on Remand Issue Was Not Justified, Such That Later Litigation Position Rulings Were Irrelevant.

     In Tobeler v. Colvin, Case No. 12-16392 (9^th Cir. Apr. 18, 2014) (published), Social Security disability claimant had obtained a remand because a Social Security administrative law judge (ALJ) had disregarded competent lay witness on claimant’s symptoms without comment, a “no no” in this area of the law. Ultimately, however, the district court concluded that the ALJ’s error was harmless. Claimant then sought attorney’s fees for obtaining a remand, but the district court denied the request after finding that the government’s position was substantially justified because it prevailed on the remainder of the ALJ’s conclusions except for the lay witness testimony issue.

    Machine signs 7,000 social security checks per hour with no writer’s cramp.  December 14, 1939.  Library of Congress.

     The denial of fees was reversed because the district court abused its discretion in concluding the government’s position was substantially justified. The problem was that the government’s underlying position on the witness issue producing a remand was unjustified. Because fees had to be awardable on this point, it did not matter that government’s litigation position was ultimately sustained at later points in the case. Remanded to fix reasonable amount of fees.

Costs: Lower Court Properly Awarded Prevailing Plaintiff Expenses For Computer Illustrations And Correctly Failed To Apportion Certain Expenses Among Other Defendants Not Present At Trial

 

However, Remand Necessary to Determine if Lower Court Parsed Out Costs of Pretrial Transcripts.

     In Hellam v. Crane Co., Case Nos. A1380131/A139141 (1^st Dist., Div. 4 Apr. 16, 2014) (unpublished), plaintiff won a sizable asbestos verdict against defendant. The lower court then awarded prevailing plaintiff about $85,000 in routine costs out of a requested $101,000, mainly excluding $16,000 in costs for daily transcript fees. (This case illustrates how routine costs can be substantial in personal injury, strict liability cases where graphic evidence and experts are involved.) Defendant challenged three items of awarded costs on appeal; it did obtain a remand on one of the items.

     The first challenge was that the lower court should have allocated costs among the other defendants pursued by plaintiff, which defendants were no longer in the case (presumably because they settled out). The trial judge denied the allocation request, concerned that defendant was the only remaining party at trial and denying the requested costs would prejudice plaintiff. The appellate court affirmed because the lower court applied the correct “reasonably necessary” routine costs standard, criticizing in the process Heppler v. J.M. Peters Co., 73 Cal.App.4^th 1265 (1999) for making a different allocation decision without relying on the routine costs statutes (although alternatively finding Heppler distinguishable in nature).

     The second challenge was to the lower court’s award of “computer illustrations” in the form of pictorial blowups of the workplace and deposition transcript segments. The lower court’s rejection of this challenge was no abuse of discretion based on its conclusion that the illustrations were reasonably necessary in the case, not just helpful to the jury’s understanding of certain events.

     The third challenge was to the allowance of costs for pretrial transcripts. Because CCP § 1033.5(b)(5) does not allow for recovery of transcripts not ordered by the court, a remand was in order because the reviewing court could not determine if the lower court had taxed these particular transcript expenses.

Bankruptcy: Debtor’s Attorney’s Fees Incurred In Successfully Defending Against Creditor's Stay Violation On Appeal Are Recoverable As Damages Under 11 U.S.C. § 362(k)(1)

 

Contrast That With Nonrecoverability of Fees For Adversary Proceeding Work Related to Pursuit of Damages From Stay Violation.

     The Ninth Circuit in In re Schwartz-Tallard, Case No. 12-60052 (9^th Cir. Apr. 16, 2014) (published) dealt with a different issue leading to a different result than that reached in Sternberg v. Johnston, 595 F.3d 937 (9^th Cir. 2010). Sternberg determined that a debtor’s fee for work on an adversary proceeding seeking damages for a stay violation were not “actual damages” under a bankruptcy statute, namely, 11 U.S.C. § 362(k)(1) (one stating that an individual injured by willful stay violation shall recover actual damages, including costs and attorneys’ fees). However, in contrast to Sternberg, the Schwartz-Tallard panel decided debtor’s successful appellate defense of a bankruptcy court determination that a creditor violated a stay was much different and did constitute “actual damages” under section 362(k)(1). Goes to show you how distinguishing between different purposes and how different procedural contexts can drive a result in a diametrically opposite direction.

Allocation/Section 1717/Substantiating Reasonableness Of Fees: Realtor/Broker Defensing Sellers’ Tort Claims And Winning Broker Compensation Cross-Claim Gets Contractual Fees Against Real Estate Plaintiffs/Sellers

 

Not Every Attorney Must Attest to Substantiation of Hours in Fee Petition.

     In Anelle v. Tran, Case No. G048072 (4^th Dist., Div. 3 Apr. 15, 2014) (unpublished), realtor/broker defendants defensed plaintiffs/sellers’ tort claims from a failed real estate transaction and also recovered listing compensation on a cross-claim where the listing agreement did contain a fees clause in favor of a prevailing party “regarding the obligation to pay compensation under [the] Agreement.” Defendants moved to recover attorney’s fees of almost $365,000 despite not having a valid memorandum of costs on file, with plaintiffs arguing that fees were not recoverable without a filed costs memorandum, fees were not awardable for defensing the tort claims, and inadequate substantiation in support of the fee petition was provided. The lower court disagreed, awarding defendants $241,355.29 in fees under Civil Code section 1717.

     Sellers’ appeal did not change the result.

     The appellate court could find no requirement that a valid memorandum of costs was a prerequisite for filing a fee motion where a court determination of fees was required, although “perhaps it is the better practice to file both [a costs memo and a fee motion].”

     Although section 1717 does not apply to tort claims, an exception exists where defense of noncontractual claims is necessary to succeed on the contractual claim. (Siligo v. Castellucci, 21 Cal.App.4^th 873, 879 (1994).) No apportionment was required—and none was made by the lower court—where the claims were intertwined and allocation was impracticable.

     Plaintiffs also argued that the fee substantiation was deficient because only a supervising attorney provided a declaration about the work effort behind the fee request. Our local appellate court found that this was an onerous, unworkable requirement: “. . . plaintiffs’ proposed requirement that every attorney who ever worked on the case submit a separate declaration is neither legally required nor particularly useful.” (Slip Opn., p. 12, also citing In re Sutter Health Uninsured Pricing Cases, 171 Cal.App.4^th 495, 512 (2009).)

     Justice Moore wrote the 3-0 opinion on behalf of the 4/3 panel hearing the matter.

SLAPP: SLAPP Fee Award In Favor Of Winning Attorneys In Malicious Prosecution Suit Affirmed On Appeal

 

Fees Can Be Substantial--$47,036.45 In This One.

      Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC, Case Nos. B237424/B239375 (2d Dist., Div. 3 Apr. 15, 2014) (published) involved former attorneys SLAPPing a client in a malicious prosecution suit. Although having to decide whether a one or two year statute of limitations applied to the malicious prosecution suit (one basis for SLAPPing), the appellate court concluded that the showing of malice was insufficient such that the SLAPP award was upheld even though the lower court’s conclusion on the SOL issue was wrong. And, the natural consequences happened to be affirmance of the $47,036.45 in attorney’s fees to the winning attorneys given the nature of the mandatory SLAPP fee-shifting statute in favor of defendants.

News . . . . Raymond “Shrimp Boy” Chow Will Get Pro Bono Representation And Katherine Jackson/Her Living Children Suffer Adverse Court Costs Award In Case Against AEG Live

 

Free Criminal Representation to Mr. Chow.

     As reported by Jeremy B. White and Dan Walter in an April 14, 2014 article in The Fresno Bee, criminal lawyers, including well-known attorney J. Tony Serra (who previously represented Huey Newton and some Black Panthers, as well as known for his vow of poverty), have agreed to provide free, pro bono representation in U.S. government charges brought against Raymond “Shrimp Boy” Chow. Mr. Chow is reputed to be the leader of a North American Asian gang, with the nickname given to him by his grandmother due to his small stature.

Wikipedia.  Public domain image.  The armed nylon shrimp (Heterocarpus ensifer).

Katherine Jackson/Her Children Hit With Court Costs Award in AEG Live Suit.

     On April 14, 2014, Los Angeles County Superior Court Judge Yvette Palazuelos issued a tentative ruling by which Katherine Jackson/her children were ordered to pay AEG Live over $800,000 in trial costs after a jury determined that AEG Live did not negligently hire the doctor convicted of causing Michael Jackson’s death in 2009. AEG Live had sought more than $1.2 million in costs originally. The tentative ruling will be finalized once AEG Live submits an amended list of routine costs.

Sanctions: Santa Cruz District Attorney’s Office, Hit With $500 Sanctions Under CCP § 177.5, Does Not Get Order Overturned On Appeal

 

One of Our Few Posts Which Might Interest Criminal Practitioners.

     This is one of the few posts that might interest criminal practitioners or practitioners who have a mixed criminal/civil practice.

     The Santa Cruz District Attorney’s Office in Lee v. Superior Court, Case No. H039380 (6^th Dist. Apr. 14, 2014) (unpublished) had a $500 sanctions order assessed against it in a criminal case under Code of Civil Procedure section 177.5, which allows a judicial officer to impose reasonable monetary sanctions not exceeding $1,500, payable to the court, for any violation of a lawful court order done without good cause or substantial justification. The basis for the award was the prosecution’s failure to produce certain videos in contravention of a court order to make disclosure before a preliminary hearing in a criminal case.

     On appeal, the reviewing court determined that the disclosure order was lawful in nature and that violation of the order was unjustified. In an interesting procedural wrinkle, the appellate court treated the appeal as a petition for extraordinary writ given the lack of clear California Supreme Court guidance regarding the appealability of sanction orders imposed in this unusual circumstance—against a district attorney’s office.

Arbitration: Post-Arbitration Trial Court Decision Awarding Substantial Attorney’s Fees To Defense Reversed Because Arbitrator Awarded No Fees To Either Side

 

Arbitral Finality Rule Violated, If Trial Court Could Award Arbitration Fees Never Conferred By Arbitrator.

     FEHA plaintiff was forced to arbitrate her case, but was “defensed” in the arbitration although the arbitrator did not assess any attorney’s fees or costs against her. However, the defense moved to recover fees and costs, with the trial court obliging by awarding costs of almost $20,000 and fees of $158,471.25 on the basis that plaintiff’s suit was frivolous, unreasonable, and groundless (a basis to shift fees to the defense under FEHA).

     Plaintiff’s appeal of the fees/costs orders in Edwards v. Broadwater Casitas Care Center, Case No. B247596 (2d Dist., Div. 5 Apr. 14, 2014) (unpublished) was largely successful in nature.

     The appellate court reversed the fees/costs order except to the extent expenses were incurred to enforce the arbitration award only. The defense lost a substantial award because the arbitrator did not award fees/costs, meaning the trial court lacked jurisdiction to do anything different based on the clear wording of the arbitration agreement regarding fees/costs allocations—whether based on any trial court findings that the arbitration claims were frivolous or without merit. (Maaso v. Signer, 203 Cal.App.4^th 362, 377 (2013); Corona v. Amherst Partners, 107 Cal.App.4^th 701, 706 (2003).) Nevertheless, the defense was entitled to obtain costs (likely, including fees, based on a concurring opinion) for judicially enforcing the arbitration award, although plaintiff was entitled to costs on appeal, but the trial court had to decide who gets fees on appeal—although providing a hint by saying “plaintiff has largely prevailed on appeal.” Mixed bag, to say the least, but advantage to appealing plaintiff, we should add.

In The News . . . Two Federal Court Of Appeals Decisions Use Different Methods To Fix Attorney’s Fees In Class Actions

 

Third Circuit Sustains Using Percentage of Recovery Method, “Cross Checked” By Lodestar Analysis, In Setting Class Action Counsel Fees.

     In Dewey v. Volkswagen of America Inc., Case Nos. 13-1123/1124 (3d Cir. Feb. 12, 2014) (not published/not precedential), the Third Circuit Court of Appeals sustained a $9,207,248 attorney’s fees award to class action counsel representing plaintiffs in a class action against V.W. resulting in a $69,277,430 settlement over leaky sunroofs. The district judge primarily used the percentage of recovery method, using 15.38% to get to a $10,967,773 “base line.” However, she “cross-checked” the result based on the lodestar analysis, determining that the percentage of recovery figure was inclusive of a 2.38 multiplier. However, because the case was not that complex, she reduced the multiplier to 2.0 and awarded $9,207,248, 13.3% percentage of settlement recovery as fees. Some objectors challenged the result, arguing that New Jersey law required the district judge to use the lodestar analysis. However, the Third Circuit rejected the notion that federal law could not be used, with the percentage of recovery being the main index applied among federal circuits in normal circumstances.

Seventh Circuit Affirms District Court’s Use of Lodestar in Fixing Class Counsel Fees Where Class Action Claims Rate Was Low.

     Well, apparently normal circumstances were not in play for a district judge fixing class action counsel fees in Americana Art China Co., Inc. v. Foxfire Printing & Packaging, Inc., 743 F.3d 243 (7^th Cir. Feb. 18, 2014). There, in a “FAX blasting” (also known as junk FAX) class action, a district court used a lodestar rather than a percentage of recovery method for purposes of awarding attorney’s fees to class counsel. The settlement was $6.1 million and, using a one-third percentage of recovery standard, fees would have been $2,033,333.33. However, because the class action claim rate to the settlement fund was only around 7%, the district judge utilized the lodestar analysis and augmented it with a 1.5 positive multiplier, producing a fee award of $1,147,698.70, a $855,634.63 reduction from the percentage of recovery result. Plaintiffs appealed, but the Seventh Circuit affirmed. It especially liked the district judge doing some “equitable balancing”—something, the federal appeals court remarked, district courts should do--by making the fees have some proportionality to the actual amount paid to the class.

Civil Rights/Multiplier: Plaintiffs’ Attorneys In Fairfield Wrongful Citizens Right Arrest Garner $308,221.80 Fee Award Despite Limited Success In Civil Rights Case

 

E.D. Cal. Federal Magistrate Judge Applied 40% Downward Adjustment Based on Limited Success.

     Hall v City of Fairfield, Case No. 2:10-cv-0508 DAD (E.D. Cal. Doc. No. 227 Mar. 31, 2014 [order granting attorney’s fees]) is a tutorial on principles governing award of attorney’s fees in the civil rights area under 42 U.S.C. § 1988(b).

     What happened in this one is that some civil rights plaintiffs sued after they claimed to the wrongful subjects of citizen arrests by a manager of In-N-Out Burgers, Inc. in arrests involving City of Fairfield law enforcement officers. The incident arose from apparently confusing plaintiffs, African Americans, with another group of unruly patrons in the area. In-N-Out settled out with three plaintiffs for $180,000, while City of Fairfield went to trial. The three plaintiffs prevailed in the aggregate amount of $12,150, even though they had rejected an aggregate F.R.Civ.P. 68 offer of $15,000 ($5,000 each). After the merits verdict (which was only based on some claims), U.S. Magistrate Judge Dale A. Drozd, who presided over the trial, awarded plaintiffs fees of $308,221.80 under the federal civil rights statute (out of a requested $692,870.75) against City.

     Magistrate Judge Drozd found that the small jury verdict alone was not the proper lodestar measure for an award of civil rights fee given that a fee award had to vindicate plaintiffs’ civil rights and send a deterrent message to law enforcement officials.

     The defense argued that plaintiffs did not beat the Rule 68 offer, but this was rejected because preoffer costs of $183,899.09 had to be considered such that the meager offer was indeed “beaten” by plaintiffs.

     The federal magistrate judge sustained awarding hourly rates of $260 and $350 to the civil rights attorneys prosecuting the case on behalf of plaintiffs, commensurate with Sacramento hourly rates.

     Generalized defense objections to hours expended did not trump specific billings, although the magistrate judge did find some reductions were in order to arrive at a base lodestar of $513,703.

     However, the limited success of plaintiffs—both as to claims and the amount of damages ultimately obtained—did lead to a 40% downward adjustment to the ultimate $308,221.80 fee award.

     HAT TIP—To our follower Carter C. White of U.C. Davis School of Law, who called this case to our attention.

Private Attorney General: Whistleblower Obtaining Substantial Jury Verdict In His Favor Did Not Confer Significant Public Benefit

 

CCP § 1021.5 Fees Denied Because Benefit Was Personal in Nature.

    Whistler and friends.  Library of Congress.

     Plaintiff whistleblower, a Los Angeles County sheriff, must have mixed emotions in Hager v. County of Los Angeles, Case Nos. B238277/239897 (2d Dist., Div. 3 Apr. 11, 2014) (unpublished).

     He won a substantial jury verdict based on a pretextual termination for whistleblowing activities, winning over $4.5 million in damages which was cut down a little over $2 million on appeal based on insufficiency of evidence to support the economic damages award. The lower court also denied awarding plaintiff any attorney’s fees under California’s private attorney general statute (CCP § 1021.5) based on a lack of a significant benefit to the public.

     This fee denial was affirmed on appeal. The problem here was that Hager was vindicating his own personal interests, not broader public interests or more widespread rights under the Peace Officers Procedural Bill of Rights Act (POBRA). “An action that rectifies illegal private or public conduct, including a suit brought under [Labor Code] section 1102.5(b) standing alone, does not establish that the action conferred a significant benefit on the public.” (Slip Opn., pp. 36-37, citing Satrap v. Pacific Gas & Electric Co., 42 Cal.App.4^th 72, 81-82 (1996).)

Arbitration/Judgment Enforcement: Parties’ “High/Low” Pre-Arbitration Agreement Enforced Where Losing Party Honored Arrangement And Was Erroneously Denied Benefit of Judgment Satisfaction Acknowledgment Procedure

 

Losing Party Played It Well All Along the Way.

     Looks like the appellate courts have been facing a lot of post-judgment enforcement fee issues lately, as recent posts have demonstrated. Here is another one to add to the list.

     Horath v. Hess, Case Nos. D063124/D063709 (4^th Dist., Div. 1 Apr. 10, 2014) (published) involved a winning arbitration claimant/plaintiff who sought to enforce a $366,527.22 arbitration award. The problem was that, before the arbitration, both sides had reached a “high/low” arrangement—not to be disclosed to the arbitrator—by which claimant would accept the lower of the arbitration award or $100,000 (but with claimant in any event obtaining not less than $44,000 even if the arbitration award was lower). Claimant agreed to accept the $100,000 (if the award was greater) plus allowable costs in satisfaction of any later confirmed judgment, even a larger judgment amount was confirmed based on the actual arbitration award. Claimant did move to confirm the $366,527.22 award, with respondent/defendant moving to force a judgment satisfaction acknowledgment given he did tender the $100,000 plus costs to claimant. Claimant argued that respondent should have moved to correct or vacate the award, with the lower court apparently agreeing by entering the full award amount, denying the judgment satisfaction motion, and awarding $5,000 in fees against respondent for bringing the satisfaction motion.

     On appeal, respondent/defendant got a clean sweep reversal.

     The “high/low” stipulation was unambiguous and should have been enforced with no necessity for a motion to correct/vacate the award. In fact, the arrangement benefited everyone: claimant got at least $44,000 in any event; respondent capped his exposure at $100,000 plus costs; and respondent obviously agreed not to contest the judgment by making the $100,000 plus costs tender. This meant the CCP § 724.050 judgment satisfaction acknowledgment motion was the correct way to go. The lower court should have granted it, so it was remanded for reconsideration—meaning it likely will be granted. That also resulted in a reversal of the $5,000 fee award to claimant under the judgment satisfaction acknowledgment fee-shifting provision (CCP § 724.080) as well as a remand to see if respondent was entitled to fees for likely gaining a judgment satisfaction. Reversal of fortune, needless to say.

      For more on the arbitration deadline problem in the case, check the April 13, 2014 post on California Mediation and Arbitration.

Off Topic: Sonoma Risk Insurance Agency Expands Its Attorneys’ Fees Risk Insurance Suite Of Products

 

Annual Coverage, Contractual Coverage, Statutory Coverage (Under Some Statutes), And Multiple/Possible Exposure Coverage Available.

Because most standard insurance policies do not cover adverse attorney’s fees awards, we have informed you over the last few years about a suite of litigation insurance policies designed to protect plaintiffs and defendants from the risk of having to pay their adversary’s attorney’s fees in litigation, in arbitration, and before a regulatory body. The products are carried by Sonora Risk Insurance Agency.

Sonoma Risk has now expanded its Attorneys’ Fees Risk Insurance (AFRI) suite of products, which initially covered only contract disputes (Contract Litigation Insurance or CLI), to also include these products: Annual Attorney’s Fees Edge (AAFE) – insurance coverage for fee awards with coverage limits beginning at $10,000 and going up to $100,000 to cover situations even before litigation is commenced on an annual basis; Statutory Attorneys’ Fees Edge (SAFE)—coverage for the risk of paying an opponent’s attorney’s fees arising out of many federal or state statutes; and Court Awarded Annual Attorneys’ Fees Edge (CAFE)—coverage for the risk of paying fees where there are multiple exposures of paying an adversary’s attorney’s fees or where the exposure of loser pays is a possibility, but not yet clearly identified.

It looks like the venues being covered has expanded, too: state court; federal court; cases filed in arbitration; and cases before a regulatory body.

Allocation/Estoppel/Fee Clause Interpretation/Section 1717/Reasonableness Of Fees: Real Estate Buyer’s Tort Claims Did Not Give Rise To Fee Exposure Under Narrowly-Worded Fees Clause

 

However, Sellers Were Liable To Third-Party For Losing Their Contractual/Indemnity Claims, Which Were Intertwined And Needed No Apportionment.

     Real estate buyer lost tort/statutorily-based nondisclosure claims to the sellers in a dispute where a purchase agreement had a fees clause mandating fees in an action brought “with respect to the subject matter of enforcement of this Agreement.” Sellers had cross-claimed for indemnity (contractual and equitable) against a billboard company, but lost on the cross-complaint. Sellers sought $514,155.72 in fees against buyer under Civil Code section 1717 (based on the fees clause), a request denied by the lower court. Billboard company moved for fees, requesting over $450,000 for its successful defense of the cross-complaint and was awarded $335,127.75 as against sellers. Sellers appealed both fee rulings in Sierra Industries West, L.P. v. Hosseinioum, Case Nos. A137517/A137874 (1^st Dist., Div. 4 Apr. 10, 2014) (unpublished), consolidated for argument/decision.

     Both fee determinations were affirmed.

     Sellers’ Appeal of Fee Denial in Buyer’s Favor. The obstacle here for Sellers was that Buyer had no contractually-based claims, such that they could not satisfy the “on the contract” requirement of section 1717. Tort and other noncontract claims are not subject to section 1717’s reciprocity principles. (Brown Bark III, L.P. v. Haver, 219 Cal.App.4^th 809, 820 (2013).) Sellers sought to avoid this conclusion by arguing the fees clause was broad enough to encompass the noncontract actions, but the appellate court actually found it was narrow and did not reach contractual claims. (Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4^th 698, 702 (1998).) Sellers’ last volley was to argue judicial estoppel based on buyer’s prayer for fees, but the reviewing court found that this theory was properly disapproved in Bear Creek Planning Committee v. Ferwerda, 193 Cal.App.4^th 1178, 1187-1188 (2011) and cases therein.

     Sellers’ Appeal of Fee Award to Cross-defendant Billboard Company. Cross-defendant was the prevailing party, because it totally defeated sellers’ indemnity cross-complaint. Apportionment of time on contractual versus equitable indemnification claims was a discretionary call by the lower court, which determined the time was inextricably intertwined. (Erickson v. R.E.M. Concepts, Inc., 126 Cal.App.4^th 1073, 1085-1086 (2005).) Beyond that, sellers did not provide a reporter’s transcript of the fee hearing such that an inadequate record was presented for review. (Vo v. Las Virgenes Municipal Water Dist., 79 Cal.App.4^th 440, 447-448 (2000).) Finally, the trial judge did discount the fee request and had revised billings aplenty to make a reasoned award.

Laffey Matrix: Riverside Superior Courts Laugh Off Laffey Matrix On Hourly Rates

Number of Years of Experience But One Factor.

     The winner of a commercial lease dispute with a fees clause was awarded $54,817.50 in fees, about 30% less than requested. On appeal, the loser argued that the trial court had to rely on the U.S. Attorney’s Office’s Laffey Matrix information in fixing fees. The appellate court in DKN Holdings LLC v. Faerber, Case No. E056294 (4^th Dist., Div. 2 Apr. 9, 2014) (unpublished) disagreed, holding it not was not determinative and factors other than years of experience can be considered when calculating fee awards.

Prevailing Party/Section 1717: Guarantor Of Arbitration Award Was Properly Hit With $85,500 In Attorney’s Fees

 

Arbitration Award Winner Did Prevail In Subsequent Action, Despite Uncertainty As to Whether Fees Were Damages or Post-trial Costs.

     Whyaduck Productions, Inc. v. Block, Case No. B245051 (2d Dist., Div. 7 Apr. 9, 2014) (unpublished) is a case which somewhat flummoxed the appellate court given a sparse record and the position of the non-prevailing party below when it came to how attorney’s fees should be claimed. In the end, the award of fees was affirmed.

     What happened here is that the principal of a respondent in an arbitration award agreed to guaranty an adverse arbitration award in return for the dropping of fraud/alter ego claims. Eventually, an adverse arbitration award was entered with only sporadic payments made in satisfaction of the award, leading the prevailing claimant to bring a separate suit against the guarantor based on the guaranty. However, during the pendency of the action, the guarantor paid what was eventually awarded as the base amount due under the guaranty. So, what was left? Ta da—you guessed it, guarantor’s claim that it was entitled to attorney’s fees for prevailing under a guaranty fees clause. There was a fair amount of confusion on whether the fees were damages under the guaranty or post-trial costs, although the guarantor claimed they should be handled via a post-trial motion, a procedure the lower court acceded to by awarding $85,500 in fees to claimant as prevailing party.

     Guarantor’s appeal did not change the result. There was a lurking legal issue of whether the claimant could truly prevail, because it obtained a net monetary recovery, when guarantor had already directly paid or where the amount entered as the base judgment had already been satisfied. However, guarantor had argued that fees could be claimed as costs after trial, so it was unfair for guarantor to shift courses and argue that the fees should have been sought as damages. Equity decided the result here, with claimant achieving its litigation objective by forcing a satisfaction of the arbitration award during the pendency of the action. Fee award affirmed.

Appealability/Equity: Appellate Court Reverses Adverse Fee Judgment Based On Parties’ Settlement Stipulation

 

No Public Policy Concerns Militate Against Honoring Parties’ Settlement.

     In GMAC Mortgage v. Sandoval, Case No. E059111 (4^th Dist., Div. 2 Apr. 8, 2014) (unpublished), lenders won a declaratory relief action with respect to lien priority and were awarded attorney’s fees of $21,284.25 based on a trust deed fees clause. Defendants appealed only the postjudgment fee order, but later reached a post-appeal filing settlement stipulation with plaintiffs through which only the fee order (not merits judgment) would be vacated, if the appellate court agreed.

     It did. Although the appeal could not be dismissed, the appellate court did agree to reverse the fee award based on the parties’ settlement—finding that the policy favoring settlement was fostered while there was no prejudice to the adverse parties/erosion of public trust. (Code Civ. Proc., § 128(a).) The merits judgment remained in place, but the fee award was reversed.

Deeds of Trust/POOF!: Trial Court’s Judicial Imposition Of Lien On Future Third Party Tortfeasor Monetary Recovery, Including Fee And Costs Awards, Goes POOF! On Appeal

 

Judicial Lien Imposition Found to be the Equivalent of an Improper Deficiency Judgment.

     Borrower/former owner of San Diego property damaged by 2007 wildfires was nonjudicially foreclosed out of the property by a junior lienholder, which held the property for a couple of years before losing it to a foreclosing senior lienholder. Former owner then sued San Diego Gas & Electric and other third party tortfeasors for various claims relating to the wildfires, with the junior lienholder suing owner back to impose a judicial lien on any future recoveries from the third party tortfeasors or for equitable conversion recovery.

     The lower court did impose a judicial lien in the amount of $837,385, plus interest, attorney’s fees and costs.

     The appellate court, in Thoryk v. San Diego Gas & Elec. Co., Case No. D062680 (4^th Dist., Div. 1 Apr. 9, 2014) (published), reversed, examining the trust deed language and determining the judicial lien imposition was the equivalent of an impermissible deficiency judgment. That meant the fee/costs awards went POOF! The decision is interesting reading for real estate practitioners and title companies to show how trust deed language needs to be made specific to include these types of recoveries as personal property subject to more lender-friendly mixed collateral rules.

Discovery/Sanctions: $6,000 In Sanctions For “Walking Away” From Deposition Affirmed On Appeal

 

“Walking Out and Not Coming Back” Is Not a Legitimate Option.

     The defense in Fletcher v. HPN Holdings, Case No. F064864 (5^th Dist. Apr. 8, 2014) (unpublished) was sanctioned $6,000 under CCP §2023.030(a), inclusive of attorney’s fees for bringing the motion to compel and arguing it, for failing to honor an agreement to take PMK depositions past the discovery cut-off. (This agreement was memorialized through renewed deposition notices and a trial court continuance stipulation.) However, at the time of the PMK depositions, defense counsel was bothered by the scope of the deposition and both he/deponent walked out of the deposition. Both the lower and appellate courts were not impressed with this conduct, determining that “walking out and not coming back, and not appearing at the other scheduled depositions, were not among [the defense’s] legitimate options.” Also, defense counsel failed to properly suspend the deposition to move for a protective order.

     Besides affirming the sanctions order, the appellate court denied the defense effort to dismiss the appeal after oral argument—determining the opinion should be issued for the education of the bench and the bar. So, if you are going to seek a dismissal, do it earlier and do it much earlier than after oral argument!

     BLAWG BONUS:  Eddie Kendricks – Keep on Truckin’.

Judgment Enforcement: Judgment Creditor’s Acceptance Of A Cashier’s Check Constituted A Judgment Satisfaction Notwithstanding Filing Of Motion For Substantial Postjudgment Enforcement Fees

 

Commercial Code Section on Cashier’s Check Tender Went Hand in Hand With Judgment Enforcement Provisions.

      You knew this one would be fun given the first paragraph in Gray1 CPB, LLC v. SCC Acquisitions, Inc., Case No. G047429 (4^th Dist., Div. 3 Apr. 9, 2014) (published): “You cross continents and spend years trying to collect a judgment for your client. Late one Friday afternoon, the debtor’s lawyer walks into your office and hands you a cashier’s check for almost $13 million, covering the entire judgment and all accumulated interest. Do you accept the check or say, ‘no thank you, I need to make a motion for attorney fees first?’ Put another way, is a bird in the hand worth two in the bush?” 

     The particular conundrum faced by the judgment creditor in this case arose from these facts: Judgment creditor had spent more than $3 million in fees to seek collection upon a $9.1 million judgment; two years after the judgment was entered based on guaranties containing fee clauses, defendants paid the amount of the outstanding judgment and accrued interest with a cashier’s check for a little shy of $13 million, but it did not include the postjudgment fees incurred by judgment creditor. Judgment creditor field a motion for postjudgment fees and then deposited the cashier’s check, which was honored. Judgment debtor had tendered the check with a demand for satisfaction of judgment, which carries a penalty and some fee exposure if not honored properly or without proper excuse. The lower court denied judgment creditor’s fee motion, finding that the motion was made “before the judgment is satisfied in full” as required by Code of Civil Procedure section 685.080(a).) However, it did deny the judgment debtor’s request for penalties/fees after finding that judgment creditor’s failure to file a timely satisfaction of judgment was not without just cause.

     Both parties appealed, but neither changed the result.

     Here, to judgment creditor’s chagrin, the judgment was satisfied—making the postjudgment fee motion untimely—when judgment creditor accepted the cashier’s check even though depositing for honor later, the UCC equivalent of accepting cash. (Comm. Code, § 3310.) What judgment creditor could have done was reject the cashier’s check before judgment debtor actually tendered cash and then file a postjudgment fee motion. “In fact, for purposes of filing a timely motion for postjudgment costs, postjudgment creditors who are provided a cashier’s check may be in a better situation than those who are paid in cash. A judgment creditor must accept cash, but may reject a cashier’s check and instead file a motion for postjudgment costs, including attorney fees.” (Slip Opn., p. 13.)

     The defense appeal lacked merit, because the judgment creditor did file a partial judgment satisfaction acknowledgment. However, given that the state of the law was such that even the appellate court published its decision in this matter, it could not be said that the trial court erred in determining that judgment creditor had some cause for not filing a complete satisfaction at the time.

     Justice Moore authored the decision on the behalf of a 3-0 panel, using the same writing flair that we see from Justice Bedsworth (who just so happened to be on the panel).