CALIFORNIA ATTORNEY'S FEES

Section 998, Workers’ Compensation: 2/2 DCA Decides § 998 Is To Be Applied Before Lab. Code § 3856 In Determining If 998 Offeror Obtained Postoffer Costs Such That A Workers’ Comp. Fee Recovery Or Lien Is Not Factored Into The Net Judgment Calculus

2/2 DCA Reconciled Two Statutory Schemes In Coming To Its Conclusion.

            In Oakes v. Progressive Transportation Services, Case No. B305535 (2d Dist., Div. 2 Nov. 10, 2021) (partially published; 998 discussion published), a plaintiff employee was hurt by an employee of another company in a rear-end car accident, and plaintiff former employer’s workers compensation insurance carrier paid for various medical treatments.  Plaintiff then sued as defendants both the employee who hit him as well as that employee’s employer for negligence and negligence per se.  Plaintiff, although receiving a positive judgment through a jury trial, had nixed a prior CCP § 998 defense offer, with the question being whether plaintiff employee’s Labor Code section 3856 contingency lawyer fee recovery should be deducted from the judgment to arrive at a new number for purposes of seeing if the 998 offeror beat the judgment.  The 2/2 DCA had to reconcile two schemes, section 998 and Labor Code section 3856.  It determined that section 998 was applied first, which meant that the calculus went this way: (1) jury verdict amount plus plaintiff’s preoffer costs before the 998 offer; and (2) deduction of the defense 998 offer postoffer costs, to arrive in a net judgment amount.  Once that was done, the resulting judgment was in defendant’s favor because the postoffer costs ate up the “gross initial” judgment such that there was no judgment for lawyer contingency fees or employer’s worker’s compensation lien.  Put another way, section 988 took precedence over Labor Code section 3856.

Fee Clause Interpretation, POOF! After A Merits Reversal, Language Of The Fees Clause Meant That The Reversed Party Did Not Prevail

Fee Clauses Without Prevailing Party Language Have Such A Condition Implied.

            Drink Tank Ventures, LLC v. Real Soda in Real Bottles, Ltd., Case Nos. B29881/B302215 (2d Dist., Div. 2 Nov. 10, 2021) (published) is an interesting case where a “prevailing party” had its intentional interference claim reversed as a matter of law.  At the lower court, where judgment was entered on this reversed claim, the trial judge granted the “then” prevailing party $280,700 in attorney’s fees based on a nondisclosure contract clause (out of a requested $785,981, based primarily on overbilling as well as denying a multiplier request).  The attorney’s fees award also evaporated because of the reversal of the merits judgment.  The appellate court looked at the fees clause, which did not have “prevailing clause” language, but implied it under CCP § 1021 and Civil Code $ 1717.  Once what was done, based on the reversal, the fee award went POOF!

Costs: Court Transcripts, Electronic Presentations, Arbitration Transcripts, and Trial Support Vendor Fee Items Considered In Discussion Of Properly Awarded Routine Costs

Only One Item Out Of The List Was Improperly Awarded.

            The general rules for awarding routine costs to a prevailing party can be distilled down this way:  some are expressly allowable; some are expressly not allowable; and if costs are not mentioned in the first two categories, they are awardable in the courts discretion if found reasonable and necessary to the conduct of the litigation.  (Code Civ. Proc., § 1033.5(a), (b), (c)(4).)  The appellate court in Engel & Engel, LLP v. Shuck, Case Nos. B297421/B300755 (2d Dist., Div. 2 Nov. 4, 2021) (unpublished) affirmed a lower court’s award of three items of costs, but reversed one costs award as being improper.  Here are the results:  (1) trial transcripts were improperly awarded because they are not recoverable unless “court ordered” (which they were not) and are distinct from allowable court reporter fees; (2) electronic presentation expenses were proper because the lower court expressly found they were helpful; (3) arbitration transcripts were allowable because only court transcripts are expressly disallowed unless court ordered; and (4) a trial support vendor’s fee was proper because it was subsumed in the electronic presentation component. 

Costs: 2/2 DCA Refuses To Carve Out Costs Exception For Prevailing Defendant In Knox-Keene Act Cases

Costs Determination Remanded To Address Specific Objections To Claimed Costs By Kaiser.

            In Long Beach Memorial Medical Center v. Kaiser Foundation Health Plan, Inc., Case Nos. B304183/ B306322 (2d Dist., Div. 2 Nov. 4, 2021 partially published; costs discussion unpublished), Kaiser was the prevailing defendant for costs because no relief was obtained against it and it obtained no relief in a Knox-Keene Act emergency medical services case.  The appellate court found that it was error for the lower court to deny costs.  The other side argued that the appellate court should fashion an exception for cases under the Act, but the court refused on the ground that it is “not our role to rewrite statutes [inclusive of the general costs statutes].”  The matter was remanded to consider opponents’ objections to specific items.

Trade Secrets: Law Firm Loosing Trade Secret Case Against Former Employee, A Transactional Attorney, Properly Assessed With Costs Of $51,477.44 And $714,382.50 In Fees Under Civil Code Section 3426.4

Appellate Court Rejected That A Frivolousness, Rather Objectively Specious, Standard Governed.

            Civil Code section 3426.4 is the fee-shifting statute under California’s Uniform Trade Secret Act.  It allows a trial court to discretionarily award reasonable fees and costs to a prevailing defendant where a misappropriation claim “is made in bad faith,” which under interpretive case law means satisfying both an objective speciousness prong and a subjective bad faith in bringing/maintaining the claim prong.  (Gemini Aluminum Corp. v. California Custom Shapes, Inc., 95 Cal.App.4^th 1240, 1262 (2002).) 

            Plaintiff law firm learned the sting of that provision when it lost its CUTSA claim against a former employee transactional attorney in SwedelsonGottlieb v. Noland, Case Nos. A156334/A156766 (1^st Dist., Div. 3 Nov. 2, 2021) (unpublished).  Right after he was passed over for equity partner and he set up his own firm in which multiple clients chose to go with him, law firm sued.  The problem was that they could not prove that defendant attorney had used any trade secrets (not even discussing over 300 documents the firm previously claimed were trade secrets), either because they were not or were publicly shared with clients/third parties, as well as not being able to show that former attorney improperly solicited clients away.  The lower court found against plaintiff, subsequently awarding defendant $51,477.44 in costs and $714,382.50 in section 3426.4 attorney’s fees.

            The 1/3 DCA affirmed.  Both prongs of section 3426.4 were met, rejecting the notion that a more stringent frivolousness standard supplanted the objective speciousness prong.  The timing of the law firm’s suit, in tandem with it lacking evidence to show trade secrets were misappropriated, sealed the result.  Ouch! – and attorney can now be awarded more appellate fees and was awarded appellate costs by the reviewing court. 

SLAPP, Substantiation Of Reasonableness Of Fees: $23,100 SLAPP Fee Award Affirmed On Appeal, Minus A Small Amount For A Nonrelated Demand Letter

Lack Of Evidentiary Challenges To Hourly Rates Justified No Reduction, And Block Billing Does Not Have To Be Reduced Depending On The Circumstances.

            In Nejad v. Abernathy, Case Nos. B304481/ B307759 (2d Dist., Div. 4 Nov. 1, 2021) (unpublished), the lower court granted $23,362.50 to a SLAPP winner, which was affirmed on appeal except for a demand letter not required under the SLAPP statute so as to reduce the award a little less to $23,100.  The appellate court rejected challenges to the hourly rates because no evidence was introduced to challenge the rates.  With respect to a block billing challenge, the trial judge has discretion not to reduce block billing—but it depends on very particular circumstances and the nature of the billing entries.  Based on a detailed record by the lower court in granting fees, the deferential abuse of discretion standard showed that the award should be sustained.

Insurance: Intervenor Obtaining Substantial Contribution Into Insurance Rate Making Process Entitled To About $650,000 In Fees

Proposition 103 Fee-Shifting Provision Was Liberally Construed In Favor Of Intervenor “Watch Dogs.”

            State Farm Gen. Ins. Co. v. Lora, Case No. D077731 (4^th Dist., Div. 1 Oct. 29, 2021) (published) is one of the first decisions under Proposition 103, which has a fee-shifting provision allowing an award of advocacy fees to a consumer representative which makes a “substantial contribution” to efforts relating to adoption of an order in an insurance rate hearing decision making process.   (Ins. Code, § 1861.10.)  The consumer advocacy intervenor was able to prevent an insurer from sealing certain records in a positive manner along the rate-making process.  The lower court awarded intervenor about $650,000 in fees, a conclusion affirmed by the appellate court.  The “substantial contribution” language was to be interpreted liberally, such that fee compensation should be allowed for unsuccessful alternative arguments (as opposed to losing on unsuccessful claims).

Arbitration, Fee Clause Interpretation, Landlord/Tenant: 1/3 DCA Affirms Trial Court’s Denial Of Attorney Fees To Prevailing Tenant

Fees Incurred For The Court Proceedings Were Part Of The Arbitration Process Called For In The Lease For Resolving Fair Market Rent Value And Not Recoverable Under The Prevailing Party Provision Which Applied To An Action Involving A Breach Of The Contract Or Determination of Rights

            In California Union Square L.P. v. Saks & Company LLC, Case No. A162043 (1^st Dist., Div., 3 October 29, 2021) (published), defendant tenant exercised its option to renew its lease following the initial 25-year term.  Because landlord and tenant were unable to agree on the fair market value of the base rent, the dispute resolution provision of the lease was triggered – which mandated arbitration.  Tenant ultimately prevailed after two arbitrations and multiple litigation proceedings in superior, federal, and appellate courts – including a petition for review with the California Supreme Court (which was denied).   Tenant then moved for roughly $1 million in attorneys’ fees – expressly noting that, pursuant to the fees provision of the lease, it was seeking fees incurred only in court proceedings, not any of the fees or costs incurred in the two arbitrations.   The trial court denied tenant’s motion following full briefing and a hearing.

            Tenant argued on appeal that the trial court erred because the parties’ lease – although providing that arbitration costs were to be divided equally between the parties – included a provision mandating “that the prevailing party in any action or proceeding to enforce the [l]ease or obtain a declaration of rights under the [l]ease recover its attorneys’ fees and costs from the losing party.”  Tenant claimed this prevailing party provision controlled the allocation of fees for the various court proceedings.  The appellate panel disagreed – finding the court proceedings were not undertaken for the purpose of enforcing or obtaining a “declaration of rights” under the lease, such as a dispute over a contractual term or obligation.  Rather, the court proceedings arose from the parties’ obligations under the provision for disputes on the fair market value of the base rent requiring arbitration.  As a result, the fees incurred for the court proceedings were a part of the process for resolving the value of the base rent and not recoverable under the prevailing party provision.

Section 998: Trial Court’s Granting Of Former Employer’s Motion To Tax Plaintiff’s Post-§ 998 Costs Based On Plaintiff’s Failure To Accept § 998 Offer Reversed On Appeal

Former Employer Had The Burden Of Proving A Valid § 998 Offer Had Been Made, But Belatedly Attached The § 998 Offer To Its Reply Papers Instead Of Its Moving Papers

            In Snoeck v. Exaktime Innovations, Case Nos. B302178/B304054 (2d Dist., Div. 3 October 29, 2021) (unpublished), plaintiff sued former employer for violations of the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.). After a five-day trial, the jury returned a verdict in former employer’s favor – with exception to one cause of action for which plaintiff was awarded $130,088 in damages.  Afterward, plaintiff moved to recover costs, but the trial court granted former employer’s motion to tax from the date plaintiff rejected former employer’s $500,000 Code Civ. Proc., § 998 offer to compromise, and awarded plaintiff $49,353.46 after taxing $30,056.44. 

            Plaintiff appealed and the 2/3 DCA reversed with direction that the trial court enter a new order awarding plaintiff $79,409.90 in costs.  The problem was that former employer – with the burden of proving a valid § 998 offer had been made – failed to include a copy of its § 998 offer in its moving papers. Instead, former employer attached a copy to its counsel’s reply declaration after plaintiff opposed the motion to tax based on former employer’s failure to meet its burden to demonstrate it made a valid § 998 offer, and objected on hearsay and secondary evidence grounds to defense counsel’s description of the § 998  offer.  Citing Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227, 241(2016) for the general rule that new evidence is not permitted with reply papers, the panel found the trial court abused its discretion by permitting former employer to submit the § 998 offer with its reply papers.  Submitting new evidence with reply papers should be permitted only in the exceptional case and, in such an event, the other party should be allowed to respond to the new evidence - which was not the case and did not happen here.