Third District Applied Analogous Reasoning From Flannery Decision.
Many times, “ownership” of an attorney’s fees award can be critical—does it belong to the attorney or the client, especially after disputes fester? The Third District in Aerotek, Inc. v. Johnson Group Staffing Co., Inc., Case No. C078435 (3d Dist. Sept. 15, 2020) (published) decided where ownership should lie for a fee award under California’s Uniform Trade Secret Act, Civ. Code, § 3426.4, after a trial judge decided the attorneys were entitled to fees of $827,938.17 plus interest following representation of a client resulting in a zero award by the other side.
The Third District, drawing from analogous reasoning in Flannery v. Prentice, 26 Cal.4th 572 in the FEHA context, decided that a trade secret fee award belongs to the attorney, not the client, unless there was an express fee agreement dictating otherwise. Here, the facts appeared to be solidly on the law firm’s side for purposes of reaching this conclusion: its client defendant was behind in its receivable, the law firm agreed to substantially write down a receivable with the ability to collect the write-off through a fee award on a “modified pro bono” basis (except the client had to reimburse routine or expert costs), and nothing indicated in the written fee agreement where surplus fees over the write-off would go. The parties’ fee agreement did not dictate otherwise, because it did not address the ownership issue on fees award over the written-off amount.
Client argued that its attorneys needed to provide a notice of right to arbitrate under the Mandatory Fee Arbitration Act, but that did not apply to fee disputes determined pursuant to statute as it was here. Client also contended that the trial judge should have allowed a jury trial on the ownership issue, but the appellate court disagreed by finding that the gist of the dispute was equitable in nature.
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