CALIFORNIA ATTORNEY'S FEES

Prevailing Party/Reasonableness Of Fees/Section 998: Pragmatic Test Made Plaintiff Prevailing Party In Lease Dispute, With All Of Requested Fees Granted

 

Defense Only Said Our Fees Are Only One Third Of The Request, With Trial Court Not Crediting That Retort.

 

    In Crowdflower, Inc. v. Asher Insights, Inc., Case No. A143235 (1^st Dist., Div. 2 Dec. 29, 2016) (unpublished), new office building owner served a CCP § 998 offer in a contentious lease/retaliation dispute with tenant. The 998 offer reserved the issue of prevailing party status and attorney's fees claims by each side for a postjudgment motion for fees determination before the assigned judge. Tenant accepted the offer, and dueling fees/costs motions ensued. Tenant prevailed and was awarded its full request of $103,680 in fees and $3,144 in costs under a contractual fees clause.

 

    The defense appeal was unsuccessful.

 

    Both sides agreed that the deferential abuse of discretion review standard was applicable to the prevailing party and "amount of fees" determinations. That concession, correct as it was, sank the defense chances on appeal.

 

    On the "prevailing party" issue, the trial judge correctly concluded that plaintiff won on a lease addendum issue by which it retained tenancy in the premises and locked in rents for a 5 year period—these were pragmatically objective litigation achievements by tenant. With respect to the amount of fees, the defense made no specific objection other than "we spent only one third of what you did," with the trial judge confirming this was only counter-salvo in the defense arsenal—a salvo which was rejected. The appellate court had no basis to overturn the lower court granting full fees/costs requests to plaintiff under the record before it.

Fee Clause Interpretation, Prevailing Party, Section 1717, Allocation: Trial Court Erred In Awarding All Defense Fees Against Voluntarily Dismissing Plaintiff Under Santisas, Requiring Remand And Allocation

However, Prevailing Defense Was Entitled To Fees For Tort Claim Work Given Breadth Of Contractual Fees Clause.

    A trial judge in Khan v. Shim, Case No. H041608 (6^th Dist. Dec. 29, 2016) (published) granted the prevailing defense all fees for defensive work incurred in defending against a complaint containing both contractual and tort claims following plaintiff's voluntary dismissal of the complaint. The Sixth District reversed and remanded for an allocation of fees between compensable and non-compensable work.

    

    The main basis for the reversal was that the trial court's ruling ran afoul of Santisas [one of Our Leading Cases] as far as allowing for recovery of work on the contract claims. However, the fees clause was broad—covering "any litigation [which was] commenced concerning the Contract of Sale's terms, interpretation, or enforcement or the rights and duties of any party in relation thereto." The breadth of the clause encompassed the tort claims, such that the lower court on remand needed to do an apportionment rather than awarding for fee work on non-tort claims.

Substantiation Of Reasonableness Of Fees: California Supreme Court In L.A. County Bd. of Supervisors Holds Billing Invoices From Nonactive, Nonpending Cases Are Not Protected By The Attorney-Client Privilege In Public Records Act Case

 

State High Court So Decides in a 4-3 Decision.

 

California Supreme Court. Wikipedia. Public domain work.

    

    In a case which may have some implications on billing substantiation submitted in support of fee motions, the California Supreme Court—in a California Public Records Act case—decided on a 4-3 vote that the attorney-client privilege does not categorically shield from PRA disclosure billing invoices sent by clients in concluded, nonactive cases because legal consultation was not the purpose of the invoices. However, our state high court did conclude that the privilege did protect billing invoice entries in active, pending cases. Justice Cuellar wrote the majority decision, but Justice Werdeger penned a dissent concluding the privilege covered billing invoices for both situations (a dissent joined in by two other sitting colleagues). The case is L.A. County Bd. of Supervisors v. Superior Court, Case No. S226645 (Cal. Supreme Court Dec. 29, 2016).

 

    BLOG OBSERVATION—It will remain to be seen how this decision will be interpreted in the fee billing substantiation area for fee motions. We would suggest that an argument could be made that the merits have been terminated in some prevailing party's favor by the time the fee proceeding is commenced (so the privilege does not categorically apply), but the counterargument is that many times both the merits of a case and the subsequent fee decision are appealed as well as frequently consolidated for consideration (meaning the case is still active and the privilege does apply). Of course, this does not prevent the fee claimant from submitting detailed billings with prudent redactions of the billing statements.

Bankruptcy: Statutory Prospective Rent Damages Cap Applies To Creditor Work In Litigating Future Rent Issues, But Does Not Apply To Work On Past Rent Or Debtor Counterclaim Ordinary Breach Of Lease Issues

 

 

Cap Only Applies To Claims Directly Resulting From Lease Termination, Not Collateral Issues.

 

    The Ninth Circuit in In re Kupfer, No. 14-16697 (9^th Cir. Dec. 29, 2016) (published) considered the extent to which attorney's fees for certain work were or were not subject to the statutory cap for prospective rent aiding a defaulting, bankrupt tenant, which cap is contained in 11 U.S.C. § 522(b)(6). The panel concluded that the cap applies to fee work for claims that result directly from lease termination, but did not apply to collateral claims. In this instance, the cap did apply to fees attributable to litigating creditors' claims for future rent, but did not apply to fees attributable to litigating claims for past rent or attributable to litigating against debtors' ordinary breach of lease counterclaims.

Reasonableness Of Fees: $72,000 Attorney’s Fees Award To Prevailing Cross-Complainant Reversed And Remanded

Relying Only On Final Settlement Offer, Rather Than Work Performed By Winner, Was Legal Error In Light Of Governing Principles.

    TSE Worldwide Press, Inc. v. Dependable Highway Express, Inc., Case No. B269747 (2d Dist., Div. 4 Dec. 28, 2016) (unpublished) is a reminder that certain challenges by a non-prevailing party to the amount of fees awarded can gain traction if attention is focused upon a trial judge's fixation on a wrong adjudicative factor.

 

    In this one, a prevailing cross-complainant, although only winning $3,096.94 on its cross-claim, was awarded $72,000 in attorney's fees under a contractual fees clause. The losing cross-defendant appealed, with that being a good move in hindsight.

 

    The 2/4 DCA reversed and remanded. The problem here was that the trial judge "over fixated" on a pre-trial offer of $72,000 rather than really looking at the reasonableness of the lodestar request by the prevailing cross-complainant. It simply was unclear whether the lower court applied the correct legal principles given that some of the work looked to be unproductive and that some of the work was not inextricably intertwined with non-compensable work. The reliance on the final settlement offer, rather than the amount of work reasonable performed, required a "re-do" in this matter.

Insurance: “Supplementary Payments” Provision Encompassed Contractually-Based Attorney’s Fees To Settling Party In Construction Defect Litigation

 

Pre-2007 CGL Policies Were At Issue.

 

    We have a year-end case for you insurance practitioners, especially coverage attorneys.

 

    In Navigators Specialty Ins. Co. v. Moorefield Construction, Inc., Case No. G050759 (4^th Dist., Div. 3 Dec. 27, 2016) (published), our local Santa Ana court of appeal decided that a pre-2007 CGL "supplementary payments" provisions in an insurance contract encompassed contractually-based attorney's fees which were allowable as "costs of suit" under the applicable insurance provision in the context of a settlement agreement. This decision, based on a footnote in it, only applies to pre-2007 CGL policies, given that post-2007 policies exclude these fees from the ambit of "supplementary payments" provisions. Justice Fybel authored the 3-0 published opinion.

Year End Wrap-Up: Mike and Marc’s Top 30 Decisions In 2016

 

Part 1 of 2—2016 Was A Prolific Year For Fees/Costs Decisions.

    As we have done in past years, wishing all readers the happiest of Holidays, we now present our top 30 published decisions from California appellate courts, the United States Supreme Court (SCOTUS), and the Ninth Circuit for the 2016 year.  For past years, we have done a “Top 20,” but this year was especially prolific for decisions involving attorney’s fees/costs issues.  This list is not meant to slight other important decisions in certain areas, but these are the ones that “rose to the top” from our perspective. We will post 15 today and 15 in an ensuing post after we let the year run down.  The number of ranking is not geared at all to the decision’s relative importance, and we do not mean to overlook other published decisions—not to mention the wealth of unpublished decisions on fees/costs issues. Here we go on the first 15, with some of them pending issuance of a decision, after a grant of review, by the California Supreme Court.

    30.  ARBITRATION/ETHICS--Sheppard, Mullin v. J-M Mfg. Co., 244 Cal.App.4th 590 (2d Dist., Div. 4 Jan. 29, 2016), rev. granted, S232946 (Cal. Supreme Ct. Apr. 27, 2016)—authored by Justice Collins; discussed in our Jan. 30, 2016 post:  Attorneys having “simultaneous representation” conflict of interest presented a situation rendering an arbitration award to attorneys illegal in nature.  The issues presented for review by the California Supreme Court are framed this way:  “(1) May a court rely on non-legislative expressions of public policy to overturn an arbitration award on illegality grounds? (2) Can a sophisticated consumer of legal services, represented by counsel, give its informed consent to an advance waiver of conflicts of interest? (3) Does a conflict of interest that undisputedly caused no damage to the client and did not affect the value or quality of an attorney’s work automatically (i) require the attorney to disgorge all previously paid fees, and (ii) preclude the attorney from recovering the reasonable value of the unpaid work?”

    29.  EMPLOYMENT--USS-Posco Industries v. Case, 244 Cal.App.4th 197 (1st Dist., Div. 1 Jan. 26, 2016)—authored by Justice Banke; discussed in our Jan. 30, 2016 post:  Amended Labor Code section 218.5, which only allows fees to prevailing employer showing a wage action was brought in bad faith, applied to subsequent, post-judgment fee motion against non-prevailing plaintiff even though a broader, more liberal fee shifting statute applied at the time of judgment.

    28.  PRIVATE ATTORNEY GENERAL-San Diego Municipal Employees Assn. v. City of San Diego, 244 Cal.App.4th 906 (4th Dist., Div. 1 Feb. 9, 2016)—authored by Judge Prager (sitting as a pro tem justice); discussed in our Feb. 10, 2016 post:  Intervenors whose work was secondary to main work by other parties were not entitled to fee recovery under California Code of Civil Procedure section 1021.5’s (private attorney general statute’s) “necessity” element.

    27.  BANKRUPTCY--Bos v. Board of Trustees, 818 F.3d 486 (9th Cir. Mar. 24, 2016)—joint opinion by Circuit Judges O’Scannlain and Ikuta as well as District Judge Burns (sitting by assignment); discussed in our Mar. 28, 2016 post:  Prevailing party in bankruptcy non-dischargeability action is not entitled to recover fees under either California Civil Code section 1717 or ERISA’s fee shifting provision.

    26.  APPEALABILITY/CLASS ACTION--Hernandez v. Muller (Restoration Hardware, Inc.), 245 Cal.App.4th 651 (4th Dist., Div. 1 Mar. 14, 2016), rev. granted, S233983  (Cal. Supreme Ct. June 22, 2016)—authored by Justice McDonald; discussed in our Mar. 19, 2016 post:  Objecting class members have no standing to appeal an attorney’s fees award unless the unnamed class members intervene in the case.  The issue presented for California Supreme Court review is:  “Must an unnamed class member intervene in the litigation in order to have standing to appeal?  (See Eggert v. Pac. States S. & L. Co. (1942) 20 Cal.2d 199.)”

    25.  COSTS/PREVAILING PARTY/SETTLEMENT--DeSaulles v. Community Hospital of the Monterey Peninsula, 62 Cal.4th 1140 (Cal. Supreme Ct. Mar. 10, 2016)—authored by Justice Liu; discussed in our Mar. 19, 2016 post:  Voluntarily dismissing plaintiff who received settlement money from a defendant was the prevailing party for purposes of a Code of Civil Procedure section 1032(a)(4) routine costs award unless the parties provided otherwise in the settlement agreement.

    24.  SECTION 998--Toste v. CalPortland Construction, 245 Cal.App.4th 362 (2d Dist., Div. 6 Mar. 2, 2016)—authored by Justice Yegan; discussed in our Mar. 5, 2016 post:  2015 amendment to Code of Civil Procedure section 998, which specified that rejecting plaintiff is only exposed to post-offer expert witness costs, applied to cases pending on appeal which challenged a section 998 award, likely requiring remands.

    23.  REASONABLENESS OF FEES/STANDARD OF REVIEW--Mountjoy v. Bank of America, N.A., 245 Cal.App.4th 266 (3d Dist. Feb. 29, 2016)—authored by Acting Presiding Justice Robie; discussed in our Mar. 1, 2016 post:  70% across-the-board fee reduction by trial judge from fee request reversed because such a broad brush decrease required a more nuanced approach and more specific explanation of the reduction; trial judge allowed to “cross check” reasonableness of prevailing party’s fee request based on the fees expended by the opposing party in proper situations.

    22.  CLASS ACTION/SUBSTANTIATION OF REASONABLENESS OF FEES—Yamada v. Nobel Biocare Holding AG, 821 F.3d 1058 (9th Cir. Apr. 20, 2016)—authored by District Judge Marbley (sitting by assignment); discussed in our Apr. 21, 2016 post:  Defense had the right to review time sheets submitted in camera to court in class action fee proceeding, even though privileged information could be redacted in the fee submission to the district judge by class counsel.

    21.  COSTS—Charton v. Harkey, 247 Cal.App.4th 730 (4th Dist., Div. 3 May 24, 2016)—authored by Justice Aronson; discussed in our May 24, 2016 post:  “Unity in interest” exception allowing trial courts discretion to deny routine costs to prevailing defendant when several non-prevailing co-defendants are unified in interest was no longer viable after a legislative repeal of former Code of Civil Procedure section 1032;  75% mathematical reduction in routine costs request based on number of total defendants was improperly overbroad methodology to utilize in the matter.

    20.  PROBATE—Conservatorship of Bower, 247 Cal.App.4th 495 (4th Dist., Div. 3 cert. for publication May 16, 2016)—authored by Justice Bedsworth; discussed in our April 16, 2016 post prior to publication:  Probate Code section 1089 did not allow probate judge to divide community property to pay for conservatorship fees, with any award guided instead by Probate Code sections 2640 and 2647.

    19.  EMPLOYMENT (PUBLIC)—Daza v. L.A. Community College, 247 Cal.App.4th 260 (2d Dist., Div. 8 May 6, 2016)—authored by Justice Flier; discussed in our May 8, 2016 post:  Public employees seeking costs of defense under Government Code section 996.4 must be allowed to present proof outside the mere pleadings to rebut employer’s “outside the scope of employment” defense to reimbursing employee’s defensively-incurred attorney’s fees.

    18.  LANDLORD/TENANT and LIENS FOR ATTORNEYS FEES—Crasnick v. Marque & Diaz, 248 Cal.App.4th Supp. 1 (L.A. Superior Ct. Appellate Div. May 24, 2016)—authored by Judge Ricciardulli; discussed in our June 5 and June 24, 2016 posts:  Tenants’ fee award subject to contractual attorney’s lien was properly not offset by landlord’s subsequent judgments against tenants in other matters.

    17.  PROBATE—Butler v. LeBouef, 248 Cal.App.4th 198 (2d Dist., Div. 6 June 20, 2016)—authored by Justice Yegan; discussed in our June 21, 2016 post:  Attorney drafter of will/living trust is liable for attorney’s fees incurred by beneficiaries under Probate Code section 21380(d); beneficiaries won $1,256,971 in fees against drafter attorney.

    16.  INTELLECTUAL PROPERTY—Kirtsaeng dba Blue Christine99 v. John Wiley & Son, 579 U.S. __, 136 S. Ct. 1538, 2016 WL 3317564 (U.S. June 16, 2016)—authored by Justice Kegan; discussed in our June 16, 2016 post:  SCOTUS clarifies factors to be weighed for purposes of awarding discretionary fees to prevailing party under Copyright Act’s fee shifting provision (17 U.S.C. § 505).

Appealability: Failure To Have Or Provide Reporter’s Transcript In Fee Denial Appeal Sinks Challenge By Prevailing Party Fee Claimant

2/5 DCA Believes Lack Of RT Can Be Fatal In Many Fee Situations.

 

    For both litigators and appellate practitioners, Patel v. Clocktower Inn, Inc., Case No. B266410 (2d Dist., Div. 5 Dec. 22, 2016) (unpublished) is a good warning sign that many California intermediate appellate panels, especially the 2/5 DCA, may find that the lack of a reporter's transcript may doom the appeal of an attorney's fees order, especially where evidence may have been challenged or weighed.

 

    Patel involved a situation where plaintiff/appellant prevailed on the merits (in a prior unpublished decision) and then filed to recover attorney's fees under the shareholder derivative "substantial benefit" basis for fee recovery. The trial judge denied plaintiff's fee motion, triggering an appeal by the winning merits plaintiff/losing fee claimant plaintiff.

 

    The 2/5 DCA, in an opinion authored by Judge Kumar (L.A. Superior Court judge sitting as a justice by assignment), decided that the lack of an RT made it impossible to gauge what was argued on some contested exhibits submitted in connection with the fee proceeding so that the reviewing court could not evaluate completely what was done without the RT. Fee denial affirmed.

 

    BLOG OBSERVATION—The lack/failure to provide an RT is an issue which must be confronted by the California Supreme Court at some stage, given that court reporters are not automatic in light of the fiscal crisis facing California courts. Presiding Justice Turner, in Patel, issued a pre-argument order asking the parties to address the lack of an RT on the review of the fee order, something which is done by the 2/5 DCA in appropriate appellate causes. This is a nice discreet issue needing to be addressed given the state of affairs on court reporter presence in trial courtrooms.

Nonsignatories: Prevailing Plaintiff Establishing Defendants Are Not Parties To License Agreement With Fee Provision Is Not Entitled To Fees Under Section 1717

When It Comes To Collecting Fees Under Civil Code Section 1717, A Prevailing Plaintiff Who Sues On A Contract Is Not The Same As A Prevailing Plaintiff Who Shows A Contract Does Not Exist.

     Glovia International, Inc. v. Actuant Corporation, et al., B267175 (2/5 12/22/16) (Kumar, Turner, Kriegler) (unpublished) reinforces a theme oft repeated in our fee blawg: the first condition a prevailing party must establish to collect attorney's fees is a legal basis for fee entitlement. In Glovia International, the Court of Appeal reversed a substantial fee award because a basis for fee entitlement under Civil Code section 1717 did not exist.

     Plaintiff and respondent Glovia sued defendants and appellants Maxima Technologies & Systems, LLC and its parent Actuant, alleging unauthorized use of Glovia's proprietary software. Glovia prevailed in the trial court by establishing that Maxima had not licensed Glovia's software, obtaining awards of compensatory damages, punitive damages, and attorney's fees. The Court of Appeal affirmed an award of compensatory damages, while reversing a $650,000 award in punitive damages, and a $1,474,151.75 award in attorney's fees pursuant to Civil Code section 1717.

     The punitive damages award was reversed because Glovia did not present sufficient evidence of defendant Maxima's financial condition.

     As to the fee award under section 1717, Glovia argued, "[W]here a dispute involves a contract that contains an attorney fee provision, section 1717 authorizes fees where a party prevails by proving the contract is invalid or unenforceable." Unfortunately for Glovia, that argument only holds true when a plaintiff sues on a contract containing a prevailing party fee provision, and the defendant prevails by arguing the contract is inapplicable, invalid, unenforceable, or nonexistent.

     Glovia, however, did not bring an action on a contract (here, a license) to enforce the contract's terms. "Instead, it brought an action claiming Actuant and Maxima were not valid holders of a license, a claim upon which Glovia prevailed." As the Court explains, because Glovia succeeded in proving it was not a party to a contract with Actuant or Maxima that contained an attorney fees clause, "it was not entitled to its attorney fees."

     So we return to our first point: there must be a legal basis for an award of attorney fees. Here, there was no basis for fee entitlement.

     NOTE: Blawg co-contributors Mike and Marc are attorneys at AlvaradoSmith. AlvaradoSmith and its attorneys Theodore E. Bacon, David John Masutani, and William M. Hensley represented Defendants and Appellants Actuant Corporation and Maxima Technologies & Systems, LLC.

Section 998: Where Plaintiff Beats 998 Offer Made Jointly By One Of Multiple Defendants, Prevailing Other Multiple Defendant Not Entitled To 998 Expense Shifting

$10,245 Expert Fee Costs Award To One Defendant Reversed, With Appellate Court Noting Split In Intermediate Appellate Thinking But Following Persson and Kahn Over Winston Square Reasoning.

 

    Ebert v. Press, Case No. D069615 (4^th Dist., Div. 1 Dec. 21, 2016) (unpublished) is a situation where two defendants put forward a joint and several CCP § 998 offer for $20,001, an offer not accepted by the plaintiff. Later, plaintiff lost a dismissal brought by one defendant on the first day of trial but did obtain a jury verdict in her favor to the tune of $60,000 as against the remaining defendant. The dismissed defendant moved for expert witness fees, with the trial court awarding $10,245 in expert costs as against plaintiff, who nevertheless did prevail against the second defendant.

 

    This one got reversed as a matter of law. However, the 4/1 acknowledged that there was a split in intermediate appellate thinking on whether the joint offer must beat a result with respect to all multiple defendants. Winston Square Homeowner's Assn. v. Centex West, Inc., 213 Cal.App.3d 282 (1989) did support dismissed defendant's position, while Persson v. Smart Inventions, Inc., 125 Cal.App.4^th 1141 (2005) and Kahn v. The Dewey Corp., 240 Cal.App.4^th 227 (2015) supported challenging plaintiff's position. The reviewing court in Ebert found Persson and Kahn more persuasive such that the $10,245 expert costs order was overturned because plaintiff did beat the 998 offer in gaining the $60,000 verdict against the second defendant.

Family Law: $680,000 Component Of Section 271 $767,781.23 Sanctions Award Reversed As A Matter Of Law

 

This Component Was Not Tethered To Fees And Costs, So Not Recoverable.

 

    We predict that Marriage of Sagonowky and Kekoa, Case Nos. 142866/A143234 (1^st Dist., Div. 5 Dec. 21, 2016) (partially published; sanctions award discussion published) is going to generate quite a stir in the family law sanctions arena and might be a candidate for California Supreme Court review.

 

    In this one, ex-wife was sanctioned a total of $767,781.23 under Family Code section 271 for driving up the costs of litigation and frustrating settlement efforts, with ex-wife not really arguing on appeal that the "merits" bases for the award were not present. However, on appeal, she did argue that $500,000 for general culpable conduct and $180,000 for causing a reduction in the sales price of real property awarded to ex-husband were not properly awardable because they were not tethered to "attorney's fees and costs" recovery as limited under section 271.

 

    The 1/5 DCA agreed, reversing the $680,000 component as a matter of law. Section 271 was clear in its limitations such that the two pieces of the award were infirm because they were not tethered to fees and costs. In doing so, it distinguished cases such as Corona, Quay, Feldman, and Falcone and Fyke in the process, cases frequently cited as broadly allowing for imposition of section 271 sanctions.

Appealability: Lower Court Order Declaring Attorney’s Fees Prevailing Party Was Not Appealable

 

Further Judicial Action Required And No Payment Of Money Directed, So Collateral Order Doctrine Did Not Apply.

    In Stahl Law Firm v. Apex Medical Technologies, Case No. D068929 (4th Dist., Div. 1 Dec. 19, 2016) (unpublished), a trial court entered an order finding ex-clients to be the prevailing party in a dispute against ex-law firm representing them (although no order had been entered fixing the amount of attorney’s fees).  Law firm appealed this determination, but the 4/1 DCA decided that it was not an appealable order and dismissed the appeal as to the prevailing party ruling.

    Law firm challenged the non-appealability argument on the basis that the prevailing party determination was appealable under the “collateral order” doctrine.  The appellate court disagreed on two counts.  First, the determination was not “final” because it required further judicial action to determine the amount of fees.  Second, the interim order did not direct the payment of money such that it was not appealable.  On the second ground, the 4/1 DCA panel did note there was an intermediate appellate minority view that did not require payment of money in order to invoke the collateral order doctrine, but it found this was simply wrong in light of the California Supreme Court’s directive to the contrary in Sjoberg v. Hastorf, 33 Cal.2d 116, 119 (1948).

In the News: Idaho Reverses American Rule

               Potato in three forms.  Ann Rosener, photographer.  Feb. 1943.  Library of Congress.

Will Idaho Losers Spudder With Fear?

     Our friend, appellate specialist Ben Shatz at Manatt, informs us:  Betsy Z. Russell of The Spokesman-Review of Spokane, Washington has an article that begins, "The Idaho Supreme Court has launched the state's entire court system on a new track that might be called 'loser pay' -- you lose a case, you pay the other side's attorney fees. No other state in the nation has gone this route, and the Supreme Court's 3-2 ruling, issued this fall, has Idaho's legal community in an uproar."  The Idaho case is Hoffer v. Shappard, Op. No. 105 *18 (Id. 2016).

     The Idaho Supreme Court case announces the application of the new standard:

“[W]e take this opportunity to announce that the courts of this state will apply a different standard to claims for attorney fees under the statute, effective March 1, 2017. The future standard to be applied is that which the Legislature has specified.
Idaho Code section 12-121 provides:
In any civil action, the judge may award reasonable attorney’s fees to      the prevailing party or parties, provided that this section shall not alter, repeal or amend any statute which otherwise provides for the award of attorney’s fees. The term “party” or “parties” is defined to include any person, partnership, corporation, association, private organization, the state of Idaho or political subdivision thereof.”

     That’s one way to clear up civil court calendars!

     And now here is an offering from the late Peter Viereck’s poem, “To a sinister potato”:

"In each Kiwanis Club on every plate,
So bland and health exuding do we wait
That Indiana never, never knows
How much we envy stars and hate the rose."

Some doom will strike (as all potatoes know)
When-once too often mashed in Idaho-
From its cocoon the drabbest of earth's powers
Rises and is a star.
And shines.
And lours."

Liens For Attorney Fee/Quantum Meruit: Discharged Attorneys In Class Action Not Entitled To Pursue Conversion Or Common Counts Against Successor Attorneys Without First Proving Entitlement To Attorney’s Lien Against Client

 

Court Of Appeal Found Instructive The Reasoning In Mojtahedi Decision.

    In this next case we post on, predecessor, discharged counsel was found to have sued the wrong party—successor counsel, rather than properly suing client to establish the validity and amount of an attorney’s lien in a retainer agreement under a “reasonable value of services” (quantum meruit) measure of recovery after predecessor counsel was discharged.

    Duke Gerstel Shearer, LLP v. Pusiano, Case No. D068633 (4th Dist., Div. 1 Dec. 13, 2016, received for posting Dec. 16, 2016) (unpublished) involved a situation where plaintiff law firm entered into a written contingency agreement in a construction defect class action.   After the death of the lead attorney occurred unexpectedly, another law firm attorney left and the class action plaintiffs discharged first law firm and retained departing attorney’s firm, which latter firm and other attorneys litigated the class action for another 5 years before resolving it through a settlement.  Successors counsel moved to recover pursuant to a similar contingency arrangement with plaintiffs, a motion approved by an Arizona court in awarding successor attorneys a total of $1.2 million of the settlement.  However, plaintiff predecessor firm submitted no fee submissions or request in the Arizona proceedings.  Later, predecessor firm sued successor attorneys on various tort claims and a common count (money had and received), largely premised on the theory that predecessor firm had an attorney’s fees lien as set forth its contingency agreement with class representatives such that it was entitled to $1.1 million.  The lower court sustained a defense demurrer without leave to amend, a ruling which was affirmed in part and reversed in part in a prior appeal.  There, the appellate court determined that prior firm should be allowed an opportunity to plead conversion and money had/received claims if it could allege a valid attorney lien giving it a right to a share of the contingency fee received by successor attorneys.  Prior law firm did file such another complaint with these two claims, but the lower court granted successor attorneys summary judgment because prior firm did not establish the enforceability and amount of the lien on which is based both its causes of action.

    In the second appeal by prior law firm, the 4/1 DCA affirmed the summary judgment ruling.

    Because prior law firm had been discharged, the proper measure of recovery for it was quantum meruit, which was further buttressed through a provision in the retainer agreement between clients and prior firm agreeing to (1) the quantum meruit recovery, and (2) submit the matter to binding arbitration.  The reviewing court found Mojtahedi v. Vargas, 228 Cal.App.4th 974, 977-978 (2014) [discussed in our July 13 and August 8, 2014 posts] instructive, where a prior firm lost a suit to obtain fees based upon an attorney lien from successor counsel because discharged counsel did not establish the existence, amount, and enforceability of the lien in an independent action against the clients before suing successor counsel.  Prior firm in Pusiano principally argued that Mojtahedi was distinguishable because an Arizona court had already awarded fees to class counsel, which was the necessary “independent action.”  The 4/1 DCA disagreed because prior law firm did not submit fee billings or file a motion to recover fees in Arizona court, with the Arizona court never passing on the validity of its attorney’s lien.  In fact, prior firm should have followed the retainer agreement procedure by trying to resolve the reasonable value of its services with clients and then submit the issue to binding arbitration as required under the retention contract.  Because prior firm did not sue client to determine the validity of and amount of its attorney fees lien, it was premature to sue the successor attorneys for claims based on the claimed lien which necessarily had to be adjudged first vis-à-vis the former clients.

Arbitration: Co-Contributor Marc’s Article On “The Politics Of Arbitration” Appears In The Current Volume Of California Litigation, The Journal Of The State Bar

One More “Hot Button Issue” For The Courts . . .   

     Co-contributor Marc Alexander, who publishes the blog California Mediation and Arbitration,  explains in the latest volume of California Litigation, that arbitration has become one more "hot button issue" for the U.S. Supreme Court Justices to disagree about.  The article is republished here with the permission of the California State Bar.

Costs/Section 998: $31,955.68 Costs Award, Many Predicated On Successful CCP § 998 Offer, Affirmed On Appeal

 

Court Reporter Costs Were Fine And 998 Offer Was Reasonable, With Losing Plaintiff Failing To Show Abuse Of Discretion In Costs Imposition Award.

    Seafood vendors, Washington, D.C.  Carol M. Highsmith, photographer.  2010.  Library of Congress.

     In Anderson v. Seafood City, Case No. B263925 (2d Dist., Div. 1 Dec. 13, 2016) (unpublished), plaintiff in a disability discrimination case suffered a dismissal based on discovery terminating sanctions.  The trial judge later awarded $31,955.68 in costs, mainly deposition reporter and expert witness fees (with the latter based upon a nixed 998 defense offer of $5,000 inclusive of fees and costs).

    The appellate court affirmed both the challenge to the terminating sanctions and costs orders.

    Plaintiff failed to surmount the deferential abuse of discretion standard, especially given that his papers below showed little about the strength of his case so as to make a dint in the 998 expense shifting by the lower court.  Plaintiff argued first that the court reporter deposition costs were excessive based on the existence of cheaper alternatives, but the fact an alternative reporter would be less costly is not controlling given that the claimed costs were actually incurred/reasonable in nature.  As far as the expert witness costs awarded because plaintiff did not beat the $5,000 998 offer, the appellate court concluded that, even though the zero result was from a terminating sanctions order rather than merits adjudicative result, plaintiff failed to present evidence about the strength of his case such that the 998 fee shifting was no abuse of discretion.  Plaintiff’s reference to a victory in a different case against different defendants was an irrelevant consideration. 

Equity: Defendant Corporation Winning Summary Judgment Properly Obtained Attorney’s Fees Although Suspended But Later Obtaining Certificate Of Revivor To Be In Good Corporate Standing

 

All Intervening Procedural Steps Were Validated, But Appellate Court Did Not Award Defendant Costs On Appeal.

    In Morschauser v. Continental Capital, LLC, Case No. E062278 (4th Dist., Div. 2 Dec. 12, 2016) (unpublished), a defendant corporation successfully obtained summary judgment against plaintiff and then moved to recover $133,644.50 in attorney’s fees and costs from losing plaintiff.  Plaintiff did not oppose, but filed a request for continuance by noting that defendant was a suspended corporation and could not proceed.  The trial judge granted the attorney’s fee request in full, triggering an appeal by plaintiff.

    The fee order was affirmed.  On its own motion, the appellate court addressed this incapacity by offering respondent/defendant one of three options:  (1) present proof it was not suspended; (2) present proof a certificate of revivor had been filed; or (3) file a declaration detailing when a certificate of revivor was going to be filed and why it had not been filed already.  Defendant winning the fee award chose option 3 and, a little over three months later, submitted a copy of the certificate showing defendant was no longer suspended/was in good standing.  Obtaining the certificate of revivor had the legal effect of validating the prior procedural steps along the way as far as the defense fee award and appeal efforts were concerned. 

    However, because defendant only took revival steps after plaintiff’s briefing on appeal was completed and in response to the appellate court’s inquiry on incapacity options, the 4/2 DCA panel refused to award routine costs of appeal to defendant, although observing this did not impact its ability to seek appellate fees on other fee entitlement bases.

Arbitration/Requests For Admission: Substantial RFA Costs-Of-Proof Sanctions Awarded By Arbitrator Correctly Not Confirmed As A Judgment

 

Arbitration Submission Agreement Did Not Envision Fees And Costs At All.

    An arbitrator in Centinela-Freeman Emergency Med. Associates v. Hispanic Physicians IPA Med. Corp., Case No. B258015 (2d Dist., Div. 1 Dec. 8, 2016) (unpublished) awarded request for admission costs-of-proof sanctions under CCP § 2033.420.  No trifling amount was awarded, because the RFA sanctions comprised $176,393.50 in attorney’s fees for RFA denials.  The trial court refused to confirm this component of the arbitration award, a ruling affirmed by the 4/1 DCA.  The parties’ arbitration submission agreement was quite narrow, not providing for an award of fees and costs.  This lack of breadth supported not confirming the RFA costs-of-proof award.

Judgment Enforcement/Sanctions: $5,000 Sanctions Award Against Judgment Debtor’s Attorney For No Answer Instructions During Judgment Debtor Examination Was Vacated

 

Reason Is That Ground For Sanctions Was Statute Only Applying To Postjudgment Interrogatories And Document Requests, Not J/D Exams.

    A lower court sanctioned a judgment debtor’s attorney to the tune of $5,000 under CCP § 2023.030 for directing a client not to answer certain questions at a judgment debtor examination.  The appellate court, in Smith Bros. Constr. v. T.S. Stone and Title, Inc., Case No. D069212 (4th Dist., Div. 1 Dec. 9, 2016) (unpublished), reversed.  The reason was simple enough:  section 2023.030 does not apply to judgment debtor exams, but only postjudgment interrogatory and document request items.  The wrong ground for the sanction was raised, a ground not allowing for imposition of sanctions.

SLAPP: $15,000 127.5 Sanctions Against Nonprevailing Plaintiff’s Counsel Affirmed Based On Plaintiff Appealing Alone

 

Word To The Wise—Both Losing Plaintiff And Plaintiff’s Counsel Should Appeal The Sanctions Award.

    The Inland Oversight Comm. v. Yates, Case No. E064787 (4th Dist., Div. 2 Dec. 8, 2016) (unpublished) is a decision having a good cautionary lesson for a nonprevailing plaintiff and its counsel when plaintiff’s attorney is hit with CCP § 128.7 after involuntary dismissal of the lawsuit.  It teaches both should file a notice of appeal if they want to challenge the sanctions ruling against the attorney.

    Here, defendant won a demurrer without leave, later filing a section 128.7 motions for sanctions.  The lower court granted $15,000 in sanctions against plaintiff’s counsel, prompting an appeal by plaintiff (but not plaintiff’s sanctioned counsel).

    That was a mistake.  The appellate court dismissed the appeal after finding that plaintiff had no standing to appeal because it was not aggrieved.  Plaintiff tried to rely on Eichenbaum v. Alan, 106 Cal.App.4th 967, 974 (2003) and Kane v. Hurley, 30 Cal.App.4th 859, 861 fn. 4 (1994) to drive a contrary result, but the 4/2 DCA panel found them distinguishable—involving sanctions jointly imposed (such that the notice of appeal by plaintiff sufficed) and/or resting on shaky analytical ground with respect to Eichenbaum.  Appeal dismissed.

Landlord/Tenant: Prevailing Tenant Seeking Fees Under CCP § 1174.21 Relating To Substandard Conditions In Residential Tenancy Can Litigate Fee Entitlement Through Posttrial Motion

 

Fee Entitlement Does Not Have To Be Shown At Trial.

    In Active Properties, LLC v. Cabrera, Case No. BV031320 (L.A. Superior Court, Appellate Division Dec. 9, 2016) (published), the appellate division faced an interplay between Code of Civil Procedure section 1174.21, a provision allowing a tenant to recover reasonable attorney’s fees and costs from an unlawful detainer-prosecuting landlord found liable for a violation of Civil Code section 1942.4, which allows a tenant to recover damages and beat a UD action by proving specified substandard inhabitability conditions.

    What happened was that residential tenant won a jury trial against a suing landlord based on inhabitable premises under Civil Code section 1942.1, determining that back rent obtained by landlord had to be disgorged to tenant.  After the jury win, tenant moved to recoup fees and costs under section 1942.2, but the lower court denied this request on the basis that 1942.2 liability had not been litigated at trial so that 1174.21 fee entitlement was lacking.

    The Appellate Division reversed.  It resolved the interplay between the two statutes in favor of section 1174.21, determining it was pro-tenant and did not require that the 1942.2 liability determination be made just at trial.  Rather, tenant could prove the liability in a posttrial noticed motion as long as the papers did show landlord was liable under 1942.2—even after the 1942.1 win before the jury.

Cases Under Review: Two Cases Pending Before The California Supreme Court Will Have Decisions Issued Within The Next Few Months

 

Los Angeles County Board of Supervisors and DisputeSuite.com Cases Are The Ones.

    We can now report that a couple of pending attorney’s fees cases before the California Supreme Court likely will be decided within the next few months.  Here are the issues and status updates:

    1.  PRIVILEGED NATURE OF FEE INVOICES IN CPRA CASES -- Los Angeles County Bd. of Supervisors v. Superior Court, S226645—2d Dist., Div. 3, 235 Cal.App.4th 1154 (Aldrich, J.).  Here is the framed issue by the state supreme court: “Are invoices for legal services sent to the County of Los Angeles by outside counsel within the scope of the attorney-client privilege and exempt from disclosure under the California Public Records Act, even with all references to attorney opinions, advice and similar information redacted?”  This case was argued and submitted on October 6, 2016.

    2. CIVIL CODE SECTION 1717 PREVAILING PARTY FOR NON-MERITS DETERMINATION -- DisputeSuite.com, LLC v. Scoreinc.com, S226652—2d Dist., Div. 2, 235 Cal.App.4th 1261 (Ashmann-Gerst, J.).  Here is the issue: “Were defendants entitled to an award of attorney fees under Civil Code section 1717 as the prevailing parties in an action on contract when they obtained the dismissal of the action on procedural grounds pursuant to a Florida forum selection clause?” This primarily pits contrary results by the 4th Dist., Div. 3 in the Profit Concepts and PNEC Corp. decisions.
An order issued from the California Supreme Court asking the interested parties to provide any conflicting dates, given the case will be set for oral argument in the next few months.

    BLOG OBSERVATION—For state appellate practitioners, it looks like the California Supreme Court now sends a scheduling letter to counsel for parties/amici asking for any conflicts after announcing an intention to set the matter for oral argument within a few months.  That happened in the second case above, as reflected on the DisputeSuite.com docket. 

Prevailing Party: Plaintiff’s Voluntary Dismissal Of Action After Obtaining Some Objectives Correctly Supported Denial Of Fee Recovery

 

However, Dismissal Did Trigger Routine Costs Recovery To Be Considered On Remand.

    In Buck v. Brooks, Case No. A142929 (1st Dist., Div. 3 Dec. 5, 2016) (unpublished), plaintiff limited partner sued to obtain more accountability from defendant general partner as far as the running of a limited partnership owning a San Leandro shopping center.  Post-lawsuit, plaintiff did obtain some of her litigation objectives by having defendant restore profit distributions, deposit partnership funds into interest-bearing accounts, and allow her inspection of partnership documents, even though demurrers were being filed by general partner along the way.  Plaintiff limited partner eventually voluntarily dismissed her action without prejudice, prompting defendant to file a costs memorandum and attorney’s fees motion.

    The lower court granted plaintiff’s motion to tax costs and denied the defense fee motion, with defendant appealing both determinations.

    “Split verdict” on appeal, but more on plaintiff’s side.

    The fee motion was correctly denied based on Santisas [a case on our “Leading Cases” list].  Even though the limited partnership fees clause was broad, it did not define “prevailing party” such that general principles applied.  Beyond that, the record showed that plaintiff did obtain several of her litigation objectives, justifying the lower court to conclude the action was not meritless and that she gained enough to prevent defendant from being the “prevailing party.”

    However, a different matter was presented as far as the routine costs denial.  Defendant was a prevailing party, for costs, based on plaintiff’s dismissal so as to result in a remand.  But the appellate court did observe that the partnership document photocopy expense needed to be looked at anew to make sure it was necessary and convenient for the litigation in the “re-do” examination.

Laffey Matrix/SLAPP: 569 East County Appellate Court Affirms SLAPP Fee Reduction After Rehearing

 

$152,529.95 Fee Request Slashed Down To $30,752.86 Through Actual Fee Order.

    On May 20, 2016 and June 20, 2016, we posted on a case which was later accepted for rehearing by the same appellate panel.  The opinion upon rehearing is now out in 569 East County Blvd. LLC v. Backcountry Against The Drop, Inc., Case No. D068538 (4th Dist., Div. 1 Dec. 5, 2016) (published; rehearing opinion).

    The result did not change upon rehearing.

    Basically, a SLAPP winner decided to request $152,529.95 in mandatory fees, subject only to the fees being “reasonable”—which was the rub in this matter.  This was based on a $750 hourly rate for a senior attorney not experienced on SLAPP matters and on a $350 hourly rate for a fifth year associate.  The lower court found that $275 per hour was more like it for a San Diego-venued case, especially where a seasoned attorney for another party in the case had charged this very same rate.  The trial judge also determined the work was excessive, awarding only $30,752.86 in fees and prompting an appeal by the losing party.

    The appellate court affirmed.  Because this was governed under a deferential abuse of discretion review standard, the lower court had to resolve conflicting testimony about hourly rates and had discretion to pick the appropriate one, not having to accept hourly rates listed in the Laffey Matrix.  (Syers Properties III, Inc. v. Rankin, 226 Cal.App.4th 691, 702 (2014).)  The reviewing court also endorsed these common sense principles in the fee petition area:  (1) lower rates should be utilized by seasoned attorneys doing tasks normally delegated to younger attorneys; and (2) blended hourly rates are acceptable in the right context.  The trial judge did not err in concluding that the fee request was inflated, reducing for that factor also.

SLAPP/Substantiation Of Reasonableness Of Fees: $66,627 SLAPP Fee Award Affirmed On Appeal

 

Plaintiff’s Challenges To Hourly Rates, Billing Substantiation, And Staffing Rejected By Trial and Appellate Courts.

     Lund v. Gifford, Case No. B259366 (2d Dist., Div. 3 Dec. 2, 2016) (unpublished) is a good example of how a successful defendant’s attorneys should draft a fee petition after winning a SLAPP motion on behalf of their client.

     Defendant moved to recoup $73,780 in fees, supported by declarations from the partner and associate working the case. The partner submitted a declaration indicating he was a 20-year practicing attorney and his $590 hourly rate was reasonable for comparable Orange County large firms. The associate (a five year practicing attorney) submitted a declaration indicating her hourly rate was $490 in 2013 and $500 in 2014, and that she excluded work unrelated to the SLAPP motion from the fee claim. In response, plaintiff submitted a declaration from a fee expert who opined that $299-375 should be the appropriate hourly rate and that the work was excessive, suggesting the fee award should be in the $22,634.30 - $28,387.50 range.

     The trial court awarded $66,627, finding the requested hourly rates were reasonable based on the judge’s own perception that fifth year associates in L.A. firms bill between $390-$600 per hour. The judge found the work to be reasonable in magnitude, but reduced the request for certain discovery work which could have been allowed (but was not).

     Defendant’s appeal of the fee award was unsuccessful, in addition to not obtaining a reversal of the underlying SLAPP grant. The appellate court found that the declarations were detailed, augmented by also including verified time statements—no problem in substantiation, with the defense not having to introduce salary surveys to meet a fee petition burden of proof. The appellate court could not say the case was overstaffed with one partner and one associate, especially given that the SLAPP motion was somewhat complex in nature. On the hourly rates, the lower court was within its right to make its own determination of what was reasonable based on knowledge of the relevant legal market. Finally, although there was some block billing, it was not so vague as to prevent meaningful review of the performed work.

Judgment Enforcement: Motion To Discharge Procedure In Surety Bond Action Encompasses Fees On Related Work

However, Work Not Incurred In Particular Special Surety Action Was Not Compensable.

     Code of Civil Procedure section 386.6 gives courts discretion to award costs and attorney’s fees to a party who pursues the deposit and discharge procedure provided by section 386.5 in a post-judgment surety bond case, namely, allowing a neutral stakeholder to apply for a discharge and obtain a dismissal if the surety is truly a neutral stakeholder (a “deposit/discharge motion”).

     These sections were in play in Wertheim, LLC v. The Bar Pan Mutual Ins. Co., Case No B268539 (2d Dist., Div. 5 Dec. 1, 2016) (unpublished), which involved a dispute between parties about the amount of fees to be paid by a surety on an appeals bond after an earlier appellate proceeding.

     The appellate issues involved a determination of the attorney work which can be compensated under section 386.6, given three constructs are at issue: (1) fees can only encompass fees “incurred in such action”—the independent judgment creditor action by which surety files the deposit/discharge motion; (2) fees must be reasonable; and (3) fees are only allowed for reimbursement of fees incurred in connection with independent judgment creditor v. surety action and with the deposit/discharge motion in that action.

     By and large, the reviewing court affirmed a fee motion for the prevailing surety except for one item. All pre-motion, motion, and post-motion deposit/discharge work was found compensable in the actual action between the earlier judgment creditor and surety, the post-judgment action by judgment creditor against the appeal bond surety. However, the surety also sought compensation for attorney work in the earlier, underlying action before the independent surety action was commenced. This did not fly because section 386.6 only allows recovery for work in the actual inter se judgment creditor/surety action—so about $10,000 got lopped off of the recovery and both parties were ordered to bear their own costs on appeal.