Lodestar, Substantiation Of Reasonableness Of Fees: Trial Judge’s Award Of $1,000 In Fees/Costs Reversed Where Requested Amount Was $164,768

Appellate Court Needed More Of A Justification For Such A Large “Haircut.”

            For readers who have followed us for some time, you would know that district judges in the Ninth Circuit have to explain “haircuts” from attorney’s fees requests which exceed 10% with some specificity.  (See, e.g., Moreno v. City of Sacramento, 534 F.3d 1106, 1111 (9^th Cir. 2008) [enunciating 10% rule]; Vargas v. Howell, 949 F.3d 1188, 1195-1197 (9^th Cir. 2020) (reviewed in our February 7, 2020 post) [reversing 90% reduction due to lack of adequate explanation].). We now report on an unpublished appellate opinion from our own local 4/3 DCA which shows how a substantial reduction led to a reversal and remand, suggesting that state courts are more and more, under the right circumstances, endorsing the federal test for large fee “haircuts.”

            In Ramirez v. CL Education, Inc., Case No. G057779 (4^th Dist., Div. 3 Sept. 30, 2020) (unpublished), plaintiffs settled a Labor Code-heavy case for $25,001 (with a final payment of $5,001 waived based on defense payments) under a written stipulation allowing recovery of attorney’s fees and costs from defendants upon plaintiffs’ motion for same.  In an opposed motion, plaintiffs requested $164,768 in fees/costs (inclusive of a 1.5 contingency multiplier request, but the trial judge only awarded a total of $1,000, with the record unclear whether the lower court had the documentation to fashion such an award.

            The Court of Appeal, in a 3-0 opinion authored by Justice Thompson, reversed and remanded.  Although recognizing the discretion given to trial judges on fee motions, the appellate court could not divine how the $1,000 award was arrived at and indicated such a reduction required at “least some explanation or justification” for purposes of supporting a substantial “haircut” of this nature.  In so doing, it cited Warren v. Kia Motors America, Inc., 30 Cal.App.5^th 24, 36 (2018) where heightened scrutiny was recognized in consumer (specifically, a Song-Beverly Act matter) and civil right cases, although observing in a footnote that the federal “haircut” rationale had not previously been applied in cases under state law fee-shifting statutes.  Interestingly enough, Warren itself cited Mountjoy v. Bank of America, N.A., 245 Cal.App.4^th 266, 280-281 (2016), which in turn applied the federal-type test in a contractual fee wrongful foreclosure matter.  So, the jurisprudence seems to be heading in the direction that substantial “haircuts” in state cases must be explained with some degree of specificity.  This is a fertile area in which to make new caselaw at the state level for litigators.