CALIFORNIA ATTORNEY'S FEES

Retainer Agreements: Trial Court Erred In Narrow Interpretation Of Retainer Agreement That Did Not Hold Client Responsible For Unpaid Fees/Costs

Pursuant To Statutory Rules Of Contract Interpretation, Contracts Should Be Construed As A Whole So As To Interpret The Mutual Intention Of The Parties.

            In Lerner & Veit v. Power, Case No. A158322 (1^st Dist., Div. 5 August 31, 2020) (unpublished), plaintiff law firm and defendant client entered into a written retainer agreement  wherein defendant would be responsible for paying the firm’s fees, costs and expenses.  Because defendant’s cousin, who was not a party to the underlying action, verbally agreed to pay defendant’s fees, the retainer agreement contained a “Payment by Other Party” clause that allowed the firm to invoice and collect from cousin, and held defendant responsible for any fees/costs not paid by cousin.

            Cousin paid $30,000 to plaintiff law firm – leaving a balance of $84,047.25, which defendant client refused to pay.  Seeking payment of the unpaid fees/costs, plaintiff first filed an action against cousin.  When that case settled and was dismissed with prejudice, plaintiff filed an action against defendant for payment of the $84,047.25 in unpaid fees/costs.  Plaintiff demurred – claiming plaintiff’s action was barred under the doctrine of res judicata.   The trial court granted demurrer without leave to amend – concluding that the retainer agreement required defendant to pay only fees/costs owed by cousin but not paid, and that because the action against cousin was dismissed, cousin owed no fees and, therefore, defendant owed no fees.  Plaintiff appealed.

            The 1/5 DCA reversed – finding that the trial court erred in its narrow interpretation of the retainer agreement.  Rather, when interpreting contracts, the mutual intention of the parties at the time the contract is formed governs interpretation.  (Civ. Code § 1636.)  Therefore, the trial court should have construed the contract as a whole so as to interpret the mutual intention of the parties.  By focusing on only the one clause related to cousin’s payments, the trial court interpreted that defendant client was not responsible for plaintiff law firm’s unpaid fees/costs, when the mutual intention of the parties was that defendant would be responsible for the fees/costs and pay any fees/costs not paid by cousin. 

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Reasonableness Of Fees, SLAPP: Defense Fees Of $79,000 Were Warranted Where Out-Of-County Lawyer Efforts Were Needed To Oppose SLAPP Motion In Siskiyou County

Defense Showed Good Faith Efforts, Albeit Unsuccessful, To Hire Local Counsel, So Higher Hourly Rate Compensation Was In Order.

            So this case was venued in Siskiyou County, which is a northern California county abutting on the Oregon border near Mount Shasta and having a population of 44,000 – 45,000 depending on how you count things. We gotta think the lawyer census is much less than that in more populous California counties.  That is borne out by the end result in Marshall v. Webster, Case No. C088240 (3d Dist. Aug. 27, 2020) (partially published; fee discussion not published).

            There, the defense won a SLAPP motion and was awarded $79,000 in mandatory fees, although this was a reduction from the requested $121,815 in fees—with the defense using San Francisco rather than local attorneys. 

            The fee award was affirmed.  Plaintiffs’ principal contention was that it was err to award defense hourly rates based on San Francisco rates versus local venue rates.  Although generally a venue-based lodestar standard is the measure, that can bend when local attorneys are not available or the hiring of local counsel was impracticable.  In this case, the defense presented evidence that he could not obtain local counsel on a contingency basis for representation given defendant did not have the resources for traditional hourly representation.  The local attorney did tell defendant that $350 per hour was typical for Siskiyou County, even though he declined to take on a contingency matter.  The $450 and $500 hourly rates for the experienced defense counsel from San Francisco did not offend either the trial or appellate courts given the inability to obtain local counsel willing to take the matter on a contingency basis.  However, given the reduction in the requested amount by almost $43,000 (about a 35% reduction), this only cemented the fee award as being reasonable in amount. 

            UPDATE:  We can now report that the (previously unpublished) fee discussion was published on September 4, 2020.

Appeal Sanctions, SLAPP: In Pro Per Defendants’ SLAPP Motion Was Frivolous, Entitling Plaintiff To $9,900 In Attorney’s Fees

Frivolous Appeal Sanctions Denied, But Plaintiff Was Entitled To Appellate Fees For Prevailing On The SLAPP Denial.

            Sometimes, there is more than one way to “skin a cat” as the proverbial saying goes.  That is what happened in Martin v. Smith, Case No. A157129 (1^st Dist., Div. 5 Aug. 26, 2020) (unpublished).

            There, two in pro per defendants filed a SLAPP motion which was deemed frivolous by the lower court, resulting in an award of $9,900 in attorney’s fees to plaintiff.  Defendants, still in pro per, then appealed.  The appellate court agreed that the SLAPP motion was frivolous and the fee award justified.  Plaintiff moved for frivolous appeal sanctions, although she failed to file a motion for sanctions and supporting declaration as required under California Rules of Court, rule 8.276.  However, because she did prevail on appeal, plaintiff was entitled to further SLAPP fees, something remanded to the lower court to determine.  (The only difference is that SLAPP fees cannot be imposed against a party’s attorney, although frivolous sanctions can.)

Arbitration, Employment: Although Arbitration Clause Had Invalid Attorney’s Fees/Costs Provision Relating To FEHA Claims, It Was Severed Such That Motion Denying Arbitration Was Reversed

Severability Saved The Day!

            In Conyer v. Hula Media Services, LLC, Case No. B296738 (2d Dist., Div. 8 Aug. 26, 2020) (published), the appellate court reversed a trial judge’s decision denying arbitration to an employer even though employee acknowledged receiving a handbook with the arbitration clause but argued that there was an employer duty to highlight the clause.  However, the arbitration clause did have an infirm attorney’s fees/costs provision, requiring each party to pay a pro rata share of the arbitrator’s fees and costs.  For FEHA claims, the employee does not have to pay fees and costs greater than the amount to file a claim under Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4^th 83, 112 (2000).  The arbitration clause also provided that the arbitrator shall award fees to the prevailing party carte blanche, despite the fact that a prevailing defendant in a FEHA case can only recover fees if the plaintiff’s action was frivolous in nature.  (Chavez v. City of Los Angeles, 47 Cal.4^th 970, 985 (2010).)  However, the severability doctrine came to the rescue—the agreement was not so permeated with unconscionability such that the fees provisions could be severed out so as to leave an enforceable agreement.  That is how the appellate court ruled, reversing the denial of the motion to compel arbitration.

Family Law: Ex-Wife Properly Denied Family Code Section 271 Sanctions Because Financial Need Is Irrelevant

Besides, Ex-Husband’s Jackson Credit Motion Had Sound Factual/Legal Bases.

            In Marriage of Siva, Case No. A157554 (1^st Dist., Div. 4 Aug. 25, 2020) (published), ex-husband was granted a Jackson child support credit, even though the trial judge denied dueling Family Code section 271 sanctions requests filed by both sides.  Ex-wife appealed the merits and sanction denial, with the merits ruling affirmed in a 2-1 decision and with the 271 sanctions denial affirmed by a 3-0 vote.

            Ex-wife initially argued that she needed fees because of financial disparity, but she had made no Family Code section 2020/2032 request such that it would not be entertained the first time on appeal.  She principally argued that she was not as financially secure as ex-husband so that 271 sanctions were justified, but this contention was dispatched because financial need is irrelevant to a 271 request.  Besides that, ex-husband’s credit motion had sound factual and legal basis behind it. 

Deadlines, Intellectual Property: Ninth Circuit Rules That Filing A Fees Motion, Absent A District Court Extension Or Decision To Treat It As A Rule 59 Motion, Does Not Extend The 30-Day Deadline To Review An Earlier Merits Decision

Practice Tips—Ask The District Judge To Treat Fee Motion As A Rule 59 Motion Or File Two Appeals, One On The Merits And One On The Fees Ruling.

            Nutrition Distribution LLC v. IronMag Labs, LLC, No. 19-55251 (9^th Cir. Aug. 25, 2020) (published) was a Lanham Act case where a plaintiff was denied monetary relief, was issued an injunction, and was denied fees on a preliminary basis through a December 13, 2018 judgment.  On December 27, 2018, plaintiff moved for post-judgment fees, a motion denied on January 30, 2019.  Plaintiff filed an appeal of the merits and fee rulings on March 1, 2019, within 30 days of the eventual fees ruling but almost 80 days after the initial judgment. 

            The Ninth Circuit first decided that the appeal of the merits ruling was untimely because it was way after 30 days from December 13, 2018.  The filing of the fees motion did not extend the time for filing an appeal unless the district judge grants an extension under FRCP 58(e) or agrees to treat the fees motion as a Rule 59 motion which allows for more time.

            With respect to the fees ruling (which could be reviewed), the district judge did not abuse its discretion in determining that it was not “exceptional” under the Lanham Act fee-shifting statute:  the motion itself violated local rules; plaintiff obtained no damages from defendant’s advertising activities; and plaintiff had filed 80 similar advertising lawsuits over a 3-year span.

            BLOG PRACTICE TIP—This case provides a practice tip in this area.  Either ask the district court to treat the fees motion as a Rule 59 motion or, if no extension is granted by the district judge, appeal the merits and fees rulings separately (with the Ninth Circuit suggesting this double appealing process carries no consequences, feeding into “healthy lawyer paranoia”). 

Allocation, Partition: Code Civ. Proc. § 874.010 Attorney’s Fee Award Of $105,147.50 For Partition Claim Affirmed Notwithstanding The Inclusion Of Fees Incurred For Other Causes Of Action

All Of The Claims And Defenses In The Action Were Inextricable Intertwined.

            In partition actions, Code Civ. Proc. § 874.010(a) authorizes an award of “[r]easonable attorney’s fees incurred or paid by a party for thee common benefit,” and Code Civ. Proc. § 874.040 requires the trial court to “apportion the costs of partition among the parties in proportion to their interests or make such other apportionment as may be equitable.”

            In Flannery v. Murray, Case No. B287284 (2d Dist., Div. 3 August 24, 2020) (unpublished), plaintiff and defendant purchased a 13-acre horse boarding ranch.  They agreed to be 50/50 owners, and each contributed toward the down payment and improvements, but defendant had a low credit score, so her name was not on the loan nor the title.  The parties’ 20-year relationship ended 7 years later, and litigation ensued over ownership of the parties’ boarding ranch – as well an insurance payout for a fire at the ranch.  Among the many causes of action alleged, both claimed a cause of action for partition.

            In the end, the trial court determined defendant was a half-owner of the ranch along with plaintiff, and was entitled to one-half of the insurance proceeds.  Defendant then moved for a post-judgment fees award pursuant to § 874.010 – seeking from plaintiff one-half of the $371,076.66 in fees she incurred.  Plaintiff opposed – arguing the fees were excessive and that defendant was entitled to recover only the reasonable fees she incurred in prosecuting her partition claim. 

            The trial court disagreed with plaintiff's contention, and awarded defendant $105,147.50 – reduced from the requested $185,538.33 for some excessiveness in time claimed to have been spent by plaintiff’s counsel, for excessive hourly rates, and for time entries for unrelated litigation. 

            Plaintiff appealed – arguing the trial erred because defendant was entitled to fees for no more than 26.5 hours of time spent on her partition claim, not for fees defendant incurred in connection with her other claims or in defense of plaintiff’s claims.

            The 2/3 DCA affirmed – finding no abuse in discretion in the trial court’s determination that all of the claims and defenses in the case related to the partition claims, and finding the trial court properly determined all the attorney fees incurred in the action were inextricably intertwined.  As a result, all the expenses incurred qualified for an award.   (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-130.)

Class Actions: Award Of $158,446, Out Of Requested $228,133.38 In Fees/Costs, To Non-Lead Plaintiff’s Counsel Affirmed On Appeal

Plaintiff’s Counsel Failed To Demonstrate That It Conferred A Benefit On The Class Beyond The $158,446 In Incurred Fees For Some Authorized Document Review.

            Attorney fee awards in class actions are wholly contingent on achieving benefit for the class – a requirement applying to both lead and non-lead counsel, with each required to demonstrate their work actually benefited the class.  As such, duplicative efforts by non-lead counsel are generally not recoverable out of the class’s recovery unless those efforts increased the recovery to the class.

            In Wheeler v. King Digital Entertainment PLC, Case No. A158660 (1^st Dist., Div. 5 August 21, 2020) (unpublished), the trial court consolidated six putative class actions seeking damages, pursuant to §§ 11, 12(a)(2), and 15 of the Securities Act of 1933 (15 U.S.C. §§ 77k, 771(a)(2) and 77o), for misstatements and omissions made in connection with defendant’s initial public offering.  The trial court also appointed a firm to serve as lead counsel, and appointed plaintiff’s counsel to serve with two other firms as an executive committee – with lead counsel responsible for authorizing the work of the other firms in order to avoid duplicative or unproductive efforts. 

            About a year later, the parties settled – with defendant agreeing to pay $18.5 million, plus accrued interest, into a settlement fund.  The trial court granted preliminary approval and set a schedule for final approval and the filing of an attorney fees application.  Plaintiffs’ counsel sought $225,799.50 in fees, plus $2,333.88 in costs – submitted to lead counsel in the form of a declaration.  When lead counsel filed its fees application, it did not include the declarations submitted by the other executive committee firms.  Rather, it submitted only its own declarations of time and expenses – seeking 29.5% of the $18.5 million recovery, or $5,457,500, which equated to an approximate 1.5 lodestar multiplier.  The trial court granted, but based the fee award on 29.5% of the recovery rather than using the lodestar/multiplier method.  Afterward, lead counsel allocated only $124,000 to plaintiff’s counsel without discussion – ultimately leading plaintiff’s counsel to seek relief from the trial court.

            Lead counsel argued that the payment of fees to plaintiff’s counsel reflected the contributions to the litigation and settlement plaintiff’s counsel had made – not a calculation of hours and rates – and that plaintiff’s counsel had performed work not authorized by lead counsel.  The trial court concluded that plaintiff’s counsel was entitled to $158,446 for authorized work it had performed. 

            On appeal, the 1/5 DCA affirmed – finding plaintiff’s counsel did not meet its burden to show it conferred a benefit on the class that went beyond the $158,446 in fees incurred for some authorized document review it performed. 

Private Attorney General: Award Of $387,593 In Attorney Fees And $15,771 In Costs To Plaintiffs Who Dismissed Their Lawsuit Was Proper And Consistent With California Policy Under Catalyst Theory

Plaintiffs Filed A Class-Action Lawsuit After Making Several Pre-Litigation Attempts At Settlement, And Dismissed The Case After Achieving Their Main Litigation Objective.

            Skinner v. Ken’s Foods, Inc., Case No. B299907 (2d. Dist., Div. 6 August 21, 2020) (published) has a nice discussion on the requirements for a Code Civ. Proc. section 1021.5 fee award under a catalyst theory.

            Plaintiffs filed a class action complaint against defendant for CLRA (Consumer Legal Remedies Act), FAL (False Advertising Law), and UCL (Unfair Competition Law) violations – alleging false and misleading labels and advertising based on the front labels of defendant’s salad dressings describing them as being made with “olive oil” when, in reality, the dressings contained mostly vegetable or canola oil and only a miniscule amount of olive oil. 

            Within five days of learning that defendant had permanently changed their labels to eliminate the misleading information, plaintiffs notified defendant that their primary litigation objective – the cessation of the “made with olive oil” claims on the front labels – had been met, and their claims for injunctive relief appeared to be moot.  Plaintiffs offered to settle the case or file a motion for catalyst fees.  Defendant rejected the offer to discuss settlement, so a motion for catalyst fees followed – with the trial court granting $387,593 in attorney fees and $15,771 in costs once plaintiffs dismissed their lawsuit.

            Defendant’s appeal went nowhere.  The 2/6 DCA found the fees/costs award proper and entirely consistent with the public policy of this state.  Plaintiffs met all of the requirements for a fees award under the catalyst theory – with defendant’s actions dragging out the case. 

            First, plaintiffs exceeded the standard requirement that they “reasonably attempt to settle the matter short of litigation,” as set forth in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4^th 553, 577.  Plaintiffs made a requisite pre-litigation demand, which was denied by defendant.  Plaintiffs then attended a neutral case evaluation conducted by a retired judge who concluded plaintiffs could likely show defendant’s conduct was deceptive under the CLRA, would likely be able to establish liability pursuant to the FAL and UCL, and could likely get the FAL and UCL claims certified as class actions.   When defendant continued to dig its heels into the ground, plaintiffs offered to attend mediation – to which defendant responded that it was “not prepared to make any offer of settlement” and would “vigorously defend [itself] against any and all claims.” 

            Next, plaintiffs’ lawsuit had merit, and defendant executives admitted that plaintiffs’ lawsuit was a motivating factor in defendant’s label change.

            Finally, because plaintiffs achieved their main litigation goal of having defendant change its salad dressing labels, the trial court correctly found them to be the successful party under Code Civ. Proc. section 1021.5.

Celebrities, Prevailing Party, Section 1717: President Donald J. Trump Ordered To Pay $44,100 In Attorney’s Fees In Story Daniels Dismissed Case After It Goes Back to LASC

However, $10,030.65 Costs Request Denied.

            By now, a lot of us are familiar with the Stephanie Clifford (aka Stormy Daniels) case against President Daniel J. Trump, which had been litigated both in federal courts and the Los Angeles County Superior Court (LASC).  In fact, Ms. Clifford got tagged with some SLAPP fees at the federal stage.  What happened eventually was that Ms. Clifford, who brought a declaratory relief suit based on a nondisclosure agreement with a fees clause, sought to invalidate a nondisclosure where $130,000 was wired to her through Michael Cohen’s trust account.  Eventually, the defendants which included President Trump, although he did not sign the nondisclosure agreement, signed a covenant not to sue and acknowledged that the settlement agreement was never formed.  Based on this, defendants moved to dismiss the suit for lack of subject matter jurisdiction in the federal court and remanded the case back of the LASC, which dismissed the case with prejudice upon Ms. Clifford’s request to do so after the defense filed a motion.

            Then, Ms. Clifford moved to recover $64,440.65 in fees and costs under both Civil Code section 1717 and the federal removal statute (28 U.S.C. §1447(c)) in Clifford v. Trump, Case No. BC696568 (L.A.S.C.).   L.A. County Superior Court Judge Robert B. Broadbelt III, in a detailed order entered on August 17, 2020 after substantial briefing by both sides, granted Ms. Clifford $44,100 in fees against President Trump, but denied $10,030.65 in costs.

            The lower court found that fees were warranted under section 1717 because Ms. Clifford prevailed given that she achieved her main litigation objective by having the defendants attempt to enforce the nondisclosure agreement against her.  The result was a procedural dismissal, but a final resolution unlike cases where a procedural dismissal was temporary with no resolution of the merits.  Because President Trump was not a signatory to the nondisclosure agreement with a fees clause, the assigned state judge had to confront whether there was a nonsignatory exception under section 1717 which applied.  He determined there was, finding that President Trump was a third-party beneficiary of the nondisclosure agreement.  With respect to the contention that fees were allowable under the federal removal statute, this did not provide an entitlement basis because the federal court never determined that removal was improper.  Judge Broadbelt found that the lead counsel’s fees were reasonable, but that fees claimed by local counsel were not substantiated by competent evidence (because lead counsel could not competently testify about their efforts in cursory fashion).  On the $10,030.65 costs request, it was denied because Ms. Clifford did not prevail under the routine costs statute—she obtained no net recovery and neither side obtained any relief.  Beyond that, Ms. Clifford failed to file a costs memorandum, a requirement for obtaining costs most of the time in California state courts. 

Family Law: $75,000 Section 271 Sanctions Award Against Ex-Wife Upheld On Appeal

Recorded Supported Award, Plus She Had $343,000 Net Worth—Ability To Pay.

            In In re Marriage of Gagliano, Case Nos. B284308 et al. (2d Dist., Div. 4 Aug. 20, 2020) (unpublished), ex-wife suffered an adverse award of $75,000 in Family Code section 271 sanctions.  The record showed that she presented altered emails to a doctor and delayed completing a 730 evaluation, with ex-husband spending $122,083.82 in attorney’s fees and costs during the process.  It also showed that she had $343,000 in net worth, with the lower court believing that she was willfully suppressing her income pictures.  Guess what, on appeal in light of this record, the 2/4 DCA affirmed.

Special Fee Shifting Statute: Brother Who Had To Bear Fees For Fruitless Appraisal Process In Involuntary Dissolution Buyout Nonperformance By Brothers Was Entitled To Appraisal Fees

However, He Was Not Entitled To Injunction-Related Fees Not Directly Tethered To The Statutory Buyout Appraisal Process.

            A statutory scheme, when considered in context, may well govern what attorney’s fees are awardable in a certain context.  That is what occurred in Schrage v. Schrage, Case No. B288478 (2d Dist., Div. 7 Aug. 19, 2020) (unpublished).

            What happened in this case was that brother Leonard filed an action against his two brothers to involuntarily dissolve a family owned business.  The two brothers invoked the statutory right to buyout the business rather than risk a dissolution order.  The problem is that the two brothers went through the appraisal process, obtained a purchase number, but did not perform.  Leonard moved to recoup attorney’s fees under various sections of the Corporations Code which guide this process, namely, sections 2000(c), 15908.02(d), and 17707.03(c)(3).  Leonard sought some referee expenses, $379,009.50 for appraisal-related fees, and $561,393.63 in injunction-related fees (given he obtained some injunctions to keep the other two brothers from abusing the family company).  In some bizarre procedural contortions, the first judge issued a tentative to grant the fees except for the injunction-related fees, but never issued an order.  A second judge was later assigned, who granted the entirety of the fees request, which gave rise to the appeal.

            The 2/7 DCA affirmed, but it did not sustain the entire fee request award.  Rather, after analyzing the Corporations Code fee-shifting provisions, it determined that only appraisal-related fees were allowable, not the injunction-related fees.  The appellate court also found that it was no error for the second judge to fail to conduct a hearing, because it was not required under the statutory scheme.  So, even though some of the costs/fees award was affirmed, $561,393.63 went bye-bye as a matter of law.

SLAPP: Partially Prevailing SLAPP Cross-Defendant’s Award Of $8,310 In Fees/Costs Affirmed

Cross-Defendant Sought $24,760, With Trial Judge Reducing For Only SLAPPing One Claim.

            Cross-defendant in Tran v. Eat Club, Inc., Case No. H046773 (6^th Dist. Aug. 19, 2020) (unpublished) successfully SLAPPed a first cause of action, but not other claims.  Because SLAPP grant fees are mandatory for a defendant/cross-defendant, plaintiff sought $24,760 in fees/costs.  The trial judge awarded $8,310 instead.  The appellate court affirmed, determining that plaintiff did strike one claim and achieved a significant benefit by narrowing the case for a claim which had some exposure.  The reduction confirmed the reasonableness of the order. 

Discovery, Sanctions: Trial Court Cannot Impose Discovery Sanctions Once A Vexatious Litigant Motion Is Filed

Imposition Of Sanctions Was Error Because Filing Of Motion Stayed Further Proceedings Except A Ruling On The Vexatious Litigant Motion.

            In Hanna v. Little League Baseball, Inc., Case Nos. E070995 et al. (4^th Dist., Div. 2 Aug. 18, 2020) (partially published; sanctions discussion published), defendant filed a motion to have plaintiff declared a vexatious litigation under CCP § 391(b), requesting plaintiff post security and requiring plaintiff to obtain judicial prefiling permission for other pleadings—common requests in this type of motion.  Defendant also had moved to obtain discovery sanctions against plaintiff.  The lower court entertained all these motions at the same time, granting the vexatious litigant motion and ordering plaintiff to pay $1,200 in discovery sanctions.  Although affirming the vexatious litigant determination, the 4/2 DCA reversed the grant of discovery sanctions.  The reason was based on the clear statutory language of CCP § 391.6, which stays proceedings such that the lower court lacked jurisdiction to entertain and to impose discovery sanctions.

Civil Rights, Costs: In Mixed FEHA/Non-FEHA Action, Costs Properly Assessed Against Nonprevailing Plaintiff

Although FEHA Case Was Not Frivolous, Costs Allowable On Non-FEHA Claims.

            Even though a losing FEHA plaintiff only gets tagged with routine costs if plaintiff’s case is frivolous, that does not mean that plaintiffs in all actions do not face exposure, which is the situation when non-FEHA claims are involved.

            Obi v. L.A. County Sheriff’s Office, Case No. B296553 et al. (2d Dist., Div. 2 Aug. 18, 2020) (unpublished) illustrates the point.  In that appeal, a plaintiff suffered an adverse summary judgment in a case with mixed FEHA and non-FEHA claims.  The trial court awarded the defense $13,191.95 in routine costs although finding that the FEHA claims were not frivolous in nature.  The appellate court affirmed the costs award because costs are recoverable with respect to non-FEHA claims, and nothing showed that the awarded costs were not incurred on all the mixed claims.  In its reply brief, plaintiff tried to challenge costs not contested in the motion to tax costs, but the 2/2 DCA said that was waived by not moving to tax them in the previous motion before the trial judge.

Prevailing Party: In Licensee Dispute Over Removal Of Improvements On Property, Reversal Of Security Deposit Ruling In Licensor’s Favor Required A Restudy Of Fees/Costs Award

$121,043 Fee Award And $14,374.60 Costs Award Had To Be Examined Based On Partial Reversal.

            In Aljabban v. Fontana Indoor Swap Meet, Inc., Case No. D076214 (4^th Dist., Div. 1 Aug. 18, 2020) (unpublished), licensor and licensee in swap meet space got into a spat over licensee’s claim about removing certain improvements and withholding $680 of a security deposit to repair the space when licensee removed some beauty salon items.  After a bench trial, a lower court found against licensee’s contract and tort claims, later awarding licensor $121,043 in attorney’s fees and $14,374.60 in costs based upon a fee clause in the license agreement.

            The fees/cost awards got reversed on appeal and remanded.  What happened is that the appellate court reversed the $680 security deposit withholding on licensee’s breach of contract/conversion claims because the license agreement did not allow for repairs to be taken out of the security deposit.  That being said, the partial reversal required a restudy of the “older” fees/costs award to determine which side actually prevailed.

            UPDATE: We can now report that this case was certified for publication on September 10, 2020. 

Special Fee Shifting Statutes: District Court’s Denial Of Attorney’s Fees To ERISA Plaintiff Bringing Breach Of Fiduciary Duty Claim Affirmed On Appeal

Plaintiff’s Requested Fees Were Incurred During His Successful Administrative Appeal For Denial Of Benefits, Not For Breach Of Fiduciary Duty, Nor During An Action In Civil Court, And Were Therefore Not Recoverable.

           The Employment Retirement Act of 1974 (ERISA) provides for two types of actions – a claim for denial of benefits under 29 U.S.C. § 1132(a)(1)(B), and a claim for breach of fiduciary duty under § 1132(a)(3).  ERISA mandates that plaintiffs claiming a denial of benefits must complete the process of administrative review in an attempt to resolve the issue prior to bringing a civil action. 

            In Castillo v. Metropolitan Life Ins. Co., Case No. 19-56093 (9^th Cir. August 17, 2020) (published), plaintiff won his claim for denial of benefits at the administrative level.  Afterward, in an attempt to recover attorney’s fees he incurred during the administrative process, plaintiff filed a civil action against defendant for breach of fiduciary duty. The district court – finding attorney’s fees incurred in the administrative appeal were not recoverable as “other appropriate equitable relief” under § 1132(a)(3) – granted defendant’s motion to dismiss and denied plaintiff’s request.

            The Ninth Circuit affirmed on appeal. 

            Plaintiff’s argument on appeal – that an award of attorney’s fees is “appropriate equitable relief” under § 1132(a)(3) – had some limited merit under a “make-whole relief” theory that would put “the beneficiary in the position he or she would have attained but for the trustee’s breach.” (Skinner v. Northrop Grumman Ret. Plan B, 673 F.3d 1162, 1167 (9^th Cir. 2012).)  However, his argument ultimately failed based on two factors.

            First, plaintiff’s argument conflicted with the 9^th Circuit’s previous decision in Cann v. Carpenters’ Pension Trust Fund for Northern California, 989 F.3d 313, 316 (9^th Cir. 1993).  There, the Ninth Circuit concluded that attorney’s fees incurred in an administrative proceeding are not recoverable under ERISA’s fee-shifting provision, § 1132(g).  Such an award would undermine ERISA’s purpose in promoting plan soundness and stability by encouraging plans to pay questionable claims in order to avoid fees liability.  Under plaintiff’s argument, the availability of fees incurred for the administrative phase of a benefits dispute “would turn on whether the claimant could successfully recharacterize a denial-of-benefits claim as a claim for breach of fiduciary duty.”

            Second, plaintiff’s argument did not account for the 9^th Circuit’s obligation to read § 1132(a)(3) in conjunction with § 1132(g).  (Util. Air Reg. Grp. v. EPA, 573 U.S. 302, 321 (2014) quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997).)  Section 1132(g) authorizes an award of fees incurred in a civil action - with “[t]he word ‘action’ generally designat[ing] only proceedings in court, not administrative proceedings.”  (See Cann, supra, 989 F.3d at p. 316.)  Additionally, as § 1132(g) is silent as to fees incurred in an administrative proceeding, there is a presumption that this omission is an exclusion.  (Copeland v. Ryan, 852 F.3d 900, 907 (9th Cir. 2017) quoting Boudette v. Barnette, 923 F.2d 754, 757 (9th Cir. 1991).)

Civil Rights: $819,335 FEHA Fee Award Stood After Appellate Court Affirmed $250,000 Emotional Distress Compensatory and $1.95 Million Punitive Damages Awards In Favor Of Plaintiff

Case Illustrates How FEHA Fee Awards Can Be Substantial For Prevailing Plaintiffs.

            FEHA has a pro-plaintiff fee shifting statute.  When plaintiffs prevail under this statute, the fee awards can be quite substantial.

            Albarracin v. Fidelity National Financial, Inc., Case No. B292895 (2d Dist., Div. 3 Aug. 13, 2020) (unpublished) illustrates this point well.  There, a plaintiff suing predominantly on FEHA sexual harassment charges won a $250,000 compensatory damages jury verdict (mostly for emotional distress) and a $1.95 million punitive damages verdict.  (The main defendant had $662 million in after-tax profits for the relevant year.)  The trial judge later awarded plaintiff $819,335 in attorney’s fees under the FEHA fee-shifting statute.  The defense unsuccessfully contested the merits on appeal, such that the substantial fee award stood also—again demonstrating how the fee awards for successful FEHA plaintiffs can be quite large in nature.

Family Law: In Two Contentious DVRO Actions, Ex-Husband’s Prior Attorney’s Fees Order, Which Was Rescinded, Was Reversed, Although Ex-Wife’s Fee Award Was Affirmed

Result Is Close To A “Wash.”

            In In re Ankola, Case Nos. H045092 et al. (6^th Dist. Aug. 12, 2020) (published), ex-spouses got involved in some nullity/domestic violence restraining order (DVRO) actions—actually two DVRO actions against each—with mixed success on the DVRO proceedings.  At the end of the day, ex-wife lost the first one, with the trial judge awarding $10,000 in prevailing party fees to ex-husband.  However, there are subsequent subplots to this case.  Ex-wife later brought a second DVRO action which the trial judge granted, later awarding her $10,562.50 in fees.  Close to a wash?  Right.  Not so fast, as lower court proceedings soon showed. 

            Trial judge, based on new evidence produced at the second DVRO action in ex-wife’s favor, “rescinded” the prior fee order in favor of ex-husband in the first DVRO action.  The lower court did so, ostensibly because it believed ex-husband was untruthful in the second DVRO action.  Ex-husband appealed, and he should be glad he did.

            Although the fees order in the second DVRO was affirmed as to ex-wife (even though ex-husband prematurely appealed, an appeal which was saved by the appellate court on equitable grounds), ex-husband obtained a reversal on the “rescission” of the prior fee award in his favor in the first DVRO action.  The reason?  The lower court rescinded based on new evidence, such that this was an improper reconsideration decision—more akin to a sua sponte new trial motion grant which is not within the inherent power of the lower court to do when based upon new evidence.

            The result—pretty close to a wash as far as fee orders were concerned.  

Landlord/Tenant, Section 1717: Property Tenant Not Signing Lease Modification Properly Denied Fees On Numerous Theories

Civil Code Section, Third-Party Beneficiary, Equitable, And Judicial Estoppel Arguments Did Not Prevail.

            In Onerent, Inc. v. Galanter, Case No. H046916 (6^th Dist. Aug. 11, 2020) (unpublished), an occupant, who thought she was co-tenant, eventually prevailed against a landlord, although the proof showed she never executed lease modifications to make her a true tenant.  Landlord gave up and dismissed without prejudice, although that actually turned into a full-fledged judgment for occupant.  However, occupant sought $11,512.50 in attorney’s fees based on the idea she prevailed under numerous theories, especially prevailing party fee clauses in the lease and the lease modifications.  The lower court denied her request, and the Sixth District affirmed.

            The major problem was that occupant was not a tenant under the lease/modification documents, because she never signed any of them.  Civil Code section 1717 reciprocity principles were not availing, because landlord could not have recovered fees against occupant, so occupant could not do the same.  The third-party beneficiary theory failed because nothing showed she was intended to benefit from the contract, other than incidental references to her in certain documents.  Equitable principles did not dictate otherwise, because the fact of the matter was that she--as a nonsignatory--did not have significant skin in the game and was not alleged to be an alter ego/successor of the actual lease signing tenant. 

            Moral of the story—put your signature on the line and belly up if you want fee entitlement (which, also, means fee exposure).   Otherwise, do not rely on downstream theories on fee entitlement to save the game!

POOF!: Trial Court’s Granting Of Defendant’s Motion For Relief From Default Judgment Of $1,402,124, Which Included $103,728 In Attorney Fees And $1,997 In Costs, Affirmed On Appeal

Plaintiff Failed To Comply With The Statutory Requirements For Substitute Service Of Process.

            Code Civ. Proc. section 415.20(b) provides the process by which substitute service of a summons and complaint may be made upon a party: “If a copy of the summons and complaint cannot with reasonable diligence be personally delivered to the person to be served ..., a summons may be served by leaving a copy of the summons and complaint at the person’s dwelling house, usual place of abode, usual place of business, or usual mailing address other than a United States Postal Service post office box, in the presence of a competent member of the household ..., at least 18 years of age, who shall be informed of the contents thereof, and by thereafter mailing a copy of the summons and of the complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.”

            In Centex Homes v. D.L. Walton, Case No. F077446 (5^th Dist., August 10, 2020) (unpublished), plaintiff, declaring it had delivered a copy of the summons and complaint through substitute service, obtained a $1,402,124 default judgment against defendant.  The judgment included $103,728 In Attorney Fees And $1,997 In Costs.

            Approximately nine months later, defendant successfully filed a motion for Code Civ. Proc. section 473 relief from the default and default judgment – asserting plaintiff failed to comply with the statutory requirements for substitute service of process – because plaintiff had served defendant’s adult daughter at a residence wholly unrelated to defendant’s business and residential address, and had additionally failed to thereafter mail a copy of the summons and complaint.  With that, plaintiff’s $1.4 Million default judgment went POOF!

            Plaintiff fared no better on appeal – with the 5^th District affirming defendant’s relief from the default and default judgment due to the improper substitute service.

Family Law: Wife’s Award Of Attorneys Fees and Costs For Bringing Post-Judgment Emergency Motion For Immediate Transfer Of Community Bitcoins Affirmed On Appeal

Husband’s $189,391 In Bitcoin Transactions, Made After Wife Filed Petition For Dissolution, Were A Breach Of His Fiduciary Duty And In Violation Of The ATROS.

            In Marriage of DeSouza, Case No. A156311 (1^st Dist., Div. 3 August 10, 2020) (unpublished), wife learned for the first time, after entry of the dissolution judgment, that husband had not been forthcoming about the three bitcoin transactions he began conducting three months after she served him with her petition for dissolution. Wife successfully moved for an emergency order compelling husband to immediately transfer her full interest in the community bitcoins to her.  She additionally received dividend funds paid on the bitcoins in the form of cryptocurrency – along with attorney fees and costs incurred for bringing the post-judgment motion.

            On appeal, husband argued that he did not breach his fiduciary duty as the information he withheld about his bitcoin transactions was not material and that there was no substantial evidence that his breach impaired wife’s interest in their community estate.  The 1/3 DCA found no merit in husband’s arguments and affirmed – agreeing with the trial court’s findings that husband had breached his fiduciary duty to wife by committing a series of transgressions surrounding his purchase and handling of the bitcoins.  First, he violated the automatic temporary restraining order (ATROS) served upon him with wife’s dissolution petition, which prohibited him from making unilateral decisions involving the community estate.  Additionally, husband had concealed his bitcoin purchases and use of proxies in two of the purchases, concealed the fact that only a portion of the bitcoins he purchased had been transferred to his digital walled while the balance remained with the bitcoin exchange, and had failed to inform wife that the bitcoin exchange had filed bankruptcy – ultimately tying up a substantial portion of the bitcoins in bankruptcy.  These were material facts that should have been disclosed to wife to allow her the ability to protect her interests in the bitcoins by objecting to a division in kind of the bitcoins and/or requesting that the trial court use its equitable powers to protect her from husband’s bitcoin transactions. 

            Interestingly, bitcoins husband had purchased for almost $45,000 – which were tied up in bankruptcy (and for which husband failed to file a bankruptcy claim for the funds – testifying “it wasn’t worth chasing [the bankrupt exchange] for little money”) had appreciated in value to around $8 million around the time wife learned of husband’s concealments.

Landlord/Tenant: 1/1 DCA Affirms $243,557 Attorneys Fees And $42,871 Costs Award To Landlord Who Successfully Moved For Judgment Notwithstanding The Verdict Following Tenants Short-Lived Jury Award Of $671,574 In Damages

Much To Tenants’ Dismay, This Case Clearly Demonstrates That A Successful JNOV Can Create A Significant Reversal Of Fortune.

            A San Francisco apartment owner (landlord) served his tenants with an eviction notice, under section 37.9 of the San Francisco Residential Rent Stabilization and Arbitration Ordinance, when he sought to regain possession to allow him and his then-fiancé to move in – later filing an unlawful detainer action against tenants.

            Tenants also filed their own action for wrongful eviction against landlord in Reynolds v. Lau, Case No. A153597 (1^st Dist., Div. 1 August 7, 2020) (unpublished).  Meanwhile, the parties settled the unlawful detainer action – with the settlement including a clause providing that the parties would each bear their own attorney fees and costs.

            More than a year later, the jury found in favor of tenants in their wrongful eviction action and awarded them $223,858 in damages – which were trebled under the rent ordinance resulting in a judgment against landlord in the amount of $671,574.  Tenants’ victory was short-lived, however, as landlord successfully moved for judgment notwithstanding the verdict.  Afterward, landlord moved to recover costs and attorney fees as the prevailing party under the rent ordinance – with the trial court awarding him $42,871 in costs and $243,557 in fees.

            Tenants appealed – arguing the trial court was required but failed to address the financial hardship the fee award would cause them; the trial court failed to deduct fees for time landlord’s counsel spent addressing the tenant harassment claim; and that the trial court failed to reduce the fee award for the amount of time landlord’s counsel spent attending depositions in the unlawful detainer action wherein the parties had settled with an agreement to pay their own fees. 

            The 1/1 DCA disagreed with tenants’ arguments and affirmed.  The trial court was under no obligation to address the financial impact of the fee award on the tenants, and the tenants had failed to raise this argument in opposition to landlord’s fee motion – thereby waiving it on appeal.  There was no abuse in discretion in the trial court’s award as the tenant harassment claim did not play a significant or independent role in the litigation – with only 6 of the 1,396 hours billed by landlord’s counsel for the tenant harassment claim which was based on landlord’s alleged failure to follow requirements for a valid owner move-in eviction under section 37.9, with the principal cause of action in the litigation being the owner move-in eviction.  Finally, as to tenants’ argument re the unlawful detainer depositions, the appellate panel again found no abuse of discretion.  Although the settlement agreement in the UD action provided that each party pay their own fees, the depositions taken in that action were also relevant in the wrongful eviction action.  Therefore, the fees incurred were a necessary litigation expense and recoverable notwithstanding the UD settlement agreement.

In The News . . . . Quinn Emanuel Firm Is Seeking 5% Of Class Action Recovery By Insurers Suing The Federal Government For Affordable Care Act Compensation In U.S. Court of Federal Claims

That Translates To An Hourly Fee Of $18,500, Almost A Twenty Percent Positive Multiplier.

            Here is an interesting one to see how it will pan out. 

            Quinn Emanuel is seeking 5% of a class action recovery by insurers suing the federal government in the U.S. Court of Federal Claims for Affordable Care Act compensation.   That fee is 5% of the $3.7 billion recovery by insurers, which certainly would not be alarming under the percentage-of-recovery benchmarks (even in mega-settlement cases).   However, the rub is that a lodestar check shows that the class action attorneys would be receiving close to a positive 20 times multiplier to their normal billable hourly rates, translating to hourly rates as high as $18,500.  This will be an interesting one to follow as far as determining what the judge does.

Family Law: $5,700 Family Code Section 2030 Borson Award To Ex-Wife Was No Abuse Of Discretion

Borson Challenge Rejected, With Record Showing Disparity In Assets Between Former Spouses.

            In Marriage of Swain, Case No. G058117 (4^th Dist., Div. 3 Aug. 3, 2020) (unpublished), ex-wife’s attorney was awarded $5,700 in Family Code section 2030 fees, payable by ex-husband to ex-wife, after her current attorney filed a request but was substituted out before the fee award was made.  Ex-husband appealed, but the 2030 order was affirmed.  First up was ex-husband’s argument that the family law judge had no jurisdiction to hear a Borson (In re Marriage of Borson, 37 Cal.App.3d 632 (1974)) request, which is one where a client-discharged attorney—with the client’s consent—may file a motion for an award of fees to attorney while the attorney is still of record, with the family court having discretion to set the amount of fees and deciding whether they are to be paid by the client or the opposing party.  That argument failed because the attorney substitution was filed after the Borson request was made such that the lower court had jurisdiction to hear it.  (In re Marriage of Erickson & Simpson, 141 Cal.App.4^th 707, 713-714 (2006).)  Although some information on Judicial Council forms was wrongly checked or omitted, there was no prejudice because the declarations and income/expense statements left no doubt about what was at issue.  Finally, the record did show that the lower court reviewed the billing statements, unlike the deliberate failure to review requiring a reversal under different facts in In re Marriage of Tharp, 188 Cal.App.4^th 1295, 1314-1315 (2010).  Justice Fybel authored the 3-0 panel opinion.