CALIFORNIA ATTORNEY'S FEES

Section 998, Special Fee Shifting Statutes: $43,300 Fee Award Under California Public Records Act Statute Was Justified

. . . However, Fee Award Had To Be Reduced Down To $2,475 Based on Successful Defense § 988 Offer With Respect To Post-Offer Fees.

            On appeal, you win some, you lose some, or the appellate court modifies judgments in varying amounts.  That third result is what occurred in Kinney v. City of Corona, Case No. E079840 (4^th Dist., Div. 2 Dec. 29, 2023) (unpublished).

            The appellate court found there was justification for a $43,300 fee award to plaintiff and against City of Corona under the fee-shifting statute in the California Public Records Act.  However, because plaintiff rejected a successful CCP § 998 offer which the reviewing court found clear and unambiguous (unlike the lower court), the fee award had to be reduced down to $2,475 because post-offer fees were not recoverable based on 998’s shifting calculus. 

Private Attorney General: Although All Factors But Financial Benefits Were Clearly Met, Remand Was Justified To Relook at Whitley Cost/Benefit Analysis

If Analysis Was OK, Nothing Wrong With The Amount Of The $582,927 Award.

            In Grossmont Union High School Dist. v. Diego Plus Education Corp., Case No. D080295 (4^th Dist., Div. 1 Dec. 29, 2023) (published), a trial court determined that a school district should pay private attorney general fees to charter schools for prevailing on an appeal with respect to whether charter schools could operate in certain areas.  The lower court awarded $582,927 out of a requested $718,232.50, or a 19% reduction.  School district appealed.  The 4/1 DCA initially determined that an abuse of discretion review standard should apply to a trial court’s award of appellate fees even after the appellate decision on the merits.  After determining that all the CCP § 1021.5 factors were satisfied but one, the panel remanded to determine if the Whitley cost/benefit analysis (our Leading Case No. 14) under the financial benefits factor was satisfied because no real analysis was made on this issue.  If the lower court determined this factor was met, charter schools was entitled to the reduced fee award plus further appellate fees incurred in the case before the reviewing court. 

Family Law: In Case Involving Criminal and SEC Insider Trading Proceedings, Appellate Court Determines That Ex-Husband’s Criminal Fees Constituted A Separate Debt But That Ex-Wife Was Liable For, As A Community Obligation, Some Of The SEC Insider Tradi

Ex-Wife Had To Bear $931,000 In Fees, Much Lower Than Multi-Millions In Fees Incurred By Husband.

            In re Marriage of Whitman, Case No. A157055 (1^st Dist., Div. 2 Dec. 29, 2023) (partially published) involved ex-husband, a hedge fund founder, who incurred multi-millions in fees defending himself in a criminal insider trading case and a parallel SEC civil proceeding.  The appellate court then considered the lower court’s allocations of fees between ex-husband and wife.   It finally determined things this way in a lengthy decision:   (1) wife was not liable for any criminal defense fees, because this was a separate debt of ex-husband under Family Code section 2623 [neither tort nor contract claims, but criminal fees incurred after their separation]; (2) wife was liable for $290,000 in fees (an allocated amount, much smaller than the lion share of the $9.4 million in fees apportioned to husband) for the SEC civil proceeding because the community obtained some benefit (Family Code, § 2625); and (3) wife was liable for about $641,000 in fees incurred by the hedge fund in intervening in the civil case because she tried to wind it down, although it was producing income at the time. 

Sanctions: $20,950 Discovery Sanctions Order Reversed Because Notice Of Motion Did Not Provide Due Process Notice To Defendant On The Basis For Such An Award

Form Does Matter When It Comes To Due Process.

            In Timlick v. National Enterprise Systems, Inc., Case No. A165127 (1^st Dist., Div. 3 Dec. 28, 2023) (unpublished), plaintiff was awarded $20,950 in attorney’s fees as a discovery “sanction” even though plaintiff’s notice of motion did not identify the party against whom the discovery sanctions was sought, did not indicate that the motion sought fees as a discovery sanction, or did not identify the code sections under which the motion was brought.  The appellate court found that this was a due process violation, because sanctions motions must be more precise and a lower court’s sua sponte decision to award them as a discovery sanction following an unsuccessful appeal by the defense did not satisfy due process concerns. 

Section 1717, Unlicensed Contractors: Unlicensed Contractor Obtaining $28,413 Contractual Fee Award Was Affirmed On Appeal Because It Was “On The Contract”

Breadth Of Clause Led To The Result.

            Co-contributor Mike had wished we had this decision many moons ago because the Second District, in an unpublished decision before the law had evolved, denied fees to an unlicensed contractor only seeking attorney’s fees, not construction compensation, in an arbitration proceeding.

            In Rodgers v. HB Construction, Inc., Case No. B317068 (2d Dist., Div. 5 Dec. 27, 2023) (unpublished), owner lost a case involving court and arbitration proceedings against an unlicensed contractor for a remodel of a Hermosa Beach office building.  The case allegations involved a contract with a broad fees clause, although the thrust of the suit was for tort or unlicensed contractor allegations.  Unlicensed contractor moved for contractual attorney’s fees of $149,378.50, but contractor was only awarded fees of $28,413, after prevailing with different entities in an arbitration and after plaintiff owner dismissed the litigation without prejudice. 

            The other side appealed, but to no avail.  Even though plaintiff voluntarily dismissed his complaint without prejudice, that did not divest the lower court from making a fees award.  The “arising out of or relating to this contract” language was broad enough to encompass the overall contractor dispute, including those under the Business and Professions Code licensure issues.  The real kicker was,  although the prevailing party was an unlicensed contractor, that only related to “compensation” under the contract rather than fees because the contract between clients and unlicensed contractors is not automatically rendered void.  Fee award affirmed.

Private Attorney General: Nonprofit Defendant/Petitioner Obtaining Certification Of Fresno’s Measure P, In A Prior Appellate Reversal, Was Erroneously Denied § 1021.5 Fees As Against City

Appellate Court Found That Private Attorney General Elements Were Met, Having Good Discussions Of The “Opposing Party,” Public Interest, And Interests of Justice Requirements.

            In City of Fresno v. Fresno Building Healthy Communities, et al., Case Nos. F084662/F084666 (5^th Dist. Dec. 26, 2023) (unpublished), a nonprofit defendant/petitioner Fresno Building Healthy Communities (FBHC) was denied a request for $362,835.75 in private attorney fees against the City of Fresno after it obtained an earlier appellate reversal of City’s failure to certify Measure P, Fresno’s Clean and Safe Neighborhoods Parks Tax Ordinance, because only a majority of voters needed to approve the measure and 52.17% of Fresno voters had voted for it. 

            The Fifth District reversed the fee denial.  Because the material facts were undisputed, a de novo review standard applied, which was a key determination which drove the reversal.

            FBHC was certainly a successful party.  The lower court erred in determining that the City was not an “opposing party,” given that City’s actions were responsible for a decision which harmed the public interests and gave rise to the litigation as well as distinguishing or discussing decisions on the issue (Nestarde, Animal Protection, and Wal-Mart Real Estate Business Trust).  The litigation clarified an important aspect of the constitutional right of initiative in California, so the public interest and significant benefit elements were satisfied.  (The appellate court rejected that City did not do anything to adversely affect the public interest, distinguishing Save Our Heritage Organisation v. City of San Diego, 11 Cal.App.5^th 154, 157-158 (2017).)  The Whitley cost/benefit analysis favored FBHC, which sought to vindicate a nonpecuniary interest and paid their attorneys over $250,000 to do so.  Because there was no financial recovery, the issue of whether the fees should be paid out of a common fund or the general municipal fisc was not of concern.  So, the matter returned to the lower court to determine the amount of fees which should be awarded to FBHC and against the City.

Appealability, SLAPP: Where SLAPP Cross-Defendant Did Not Eliminate All Cross-Claims And Received Less Than Requested SLAPP Fees, Fee Order Was Not Appealable

No Final Judgment Was Entered, And Collateral Order Doctrine Did Not Apply Because The Fee Order Did Not Order Payment Of Money By Partially Prevailing Cross-Defendant.

            Cross-defendant in Delis v. Thorn, Case No. F084879 (5^th Dist. Dec. 26, 2023) (unpublished) successfully SLAPP-ed 4 out of 5 cross-claims, moved for mandatory SLAPP fees, and was awarded only $15,500 out of the requested more than $85,000 in fees.  Cross-defendant appealed the fee order for not awarding more money to him.

            The Fifth District dismissed the appeal because it was premature.  CCP § 904.1 does not list a SLAPP fee award as immediately appealable.  There was no final judgment in the case because both parties have claims remaining to litigate.  The collateral order doctrine did not apply because cross-defendant was not ordered to pay any moneys; quite the opposite, cross-defendant obtained some fees such that he was not aggrieved with the scope of the doctrine.

            His appeal would have to await entry of a final judgment in the case unless a voluntary resolution occurs.

Fee Clause Interpretation, Landlord/Tenant: Unlawful Detainer Action Did Not Arise Out Of Lease Fees Clause Given That Foreclosing Landlord Was Suing On A Statutory Basis For Obtaining Possession

Unique Facts Of The Case Governed The Outcome.

            The breadth or narrow nature of a contractual fees clause frequently can determine whether fee entitlement exists in a case.  De Witte Mortgage Investors Fund, LLC v. Carradine, Case No. B322747 (2d Dist., Div. 1 Dec. 19, 2023) (unpublished) vindicates that general principle.  Briefly stated, an entity acquired ownership of a property through foreclosure and then sought to evict certain defendants, with Carradine being added as a party to an unlawful detainer proceeding.  Carradine was successful because the new owner did not comply with municipal code requirements so as to be entitled to an eviction.  However, the lower court denied Carradine’s request for attorney’s fees as the prevailing party under a lease clause.

            The 2/1 DCA affirmed.  The appellate court agreed that the unlawful detainer proceeding was not premised on a lease with true prior tenants.  Losing party premised possession on a statute applicable to obtaining title by a foreclosure sale, and it lost based on failing to satisfy a municipal statute—nothing based on the lease.  The order denying fees was sustained on appeal.

Allocation: Where Successful Claim Work Was Related To Unsuccessful Claim Work, Trial Court Did Not Abuse Its Discretion In Failing To Apportion Work On Unsuccessful Claim

Approximate $600,000 Fee Award Affirmed On Appeal.

            In O’Hara v. Liberty Rural County Fire Protection Dist., Case Nos. C096135 et al. (3d Dist. Dec. 19, 2023) (unpublished), plaintiff obtained a $3 million jury damages verdict based on Firefighters Procedural Bill of Rights (FPBOR) and federal civil rights (42 U.S.C. § 1988) claims, although he lost a defamation claim.  The lower court also added gross-up damages and civil penalties of an additional $1,325,000.  Then, when fee entitlement was not contested, the lower court granted a little shy of $600,000 in attorney’s fees.

            Defendant District appealed, arguing that defamation unsuccessful work should have been apportioned out for purposes of crafting a fee award.  The appellate court disagreed, because the lower court indicated that all claims were related such that it was impossible to do an apportionment, a determination sustained on appeal.  There is a good discussion in this opinion about limited success and apportionment principles operative in fee motions.

Costs: $68,441.99 Costs Award Affirmed On Appeal, Avoiding Judicial Council Form Lack Of Verification Language In Costs Memorandum

Fifth District Split Decision On This Issue Did Not Need To Be Confronted.

            The Fourth District, Division Three, in an unpublished decision authored by Presiding Justice O’Leary, did not have to confront an issue which divided the Fifth District in Srabian v. Triangle Track Center, Case No. F080066 (Aug. 12, 2022), where the dissenting justice wrote a very detailed opinion indicating why use of the Judicial Council costs of memorandum form was defective in not containing “penalty of perjury” language.  In the appeal before the Santa Ana appellate court, Pars Publishing Corp. v. Ordway Corp., Case No. G061374 (4^th Dist., Div. 3 Dec. 18, 2023) (unpublished), the prevailing party was awarded $68,411.99 in costs, using the Judicial Council form found defective by the dissenting justice in Srabian.  However, because this argument was not raised in the trial court, it was deemed waived so that the 4/3 DCA panel did not have to dive into the issue.  Beyond that, there was some authentication of specific costs, in an opposing declaration under penalty of perjury, to support awarding costs even if the Judicial Council language was flawed.

SLAPP: Losing Party’s Efforts To Challenge $24,281.50 Fee/Costs Order To Prevailing Defendant, From A $32,799 Ask, Was Rebuffed On Appeal

Challenges Were To Lower Court’s Discretionary Calls, With The 25% Reduction Below Showing Discretion Was Exercised.

            Smith v. Entrepreneur Media, Inc., Case No. G060839 (4^th Dist., Div. 3 Dec. 18, 2023) (unpublished), authored by Acting Presiding Justice Bedsworth, is another illustration as to why challenges to the amount of attorney’s fees awarded are on the downwards slide of the curve as far as success ratio on appeal—especially where the lower court reduced the fee/costs ask in the first instance.

            In this one, defendant prevailed on a SLAPP motion requiring an award of mandatory fees against an in pro per plaintiff, with the lower court awarding $24,281.50 in fees and costs against an “ask” of $32,799, around a 25% reduction.  Plaintiff appealed, but he was not successful.

            The main problem was the deferential review standard (abuse of discretion) on the amount awarded, bolstered by the fact the lower court reduced the winning defendant’s fees below.  Although defense counsel asked for higher hourly rates than billed, that is alright because the lodestar rate in the community prevails even if the billed hourly rate is lower.  The lower court did apportion out time for non-SLAPP activities such that the SLAPP recovery was tethered to the proper SLAPP activities.  With respect to inflated fees, even if a lower court determines some were inflated, this does not mean the lower court is required to deny fees altogether. 

Civil Rights: Unruh Act In Disability Action Denied More Fees Under Civil Code Section 52

Plaintiff Did Win Some Fees. But More Additional Fees Not Allowable Because Of Failure To Provide Reporter’s Transcript On Fee Motion Hearing.

            We can only tell you that some appellate courts strictly enforce the necessity of a reporter’s transcript on a fee motion hearing on entitlement and/or fee reasonableness issues.  The lack of an adequate record on appeal was fatal in Pumphrey v. Min & Hong Corp., Case No. B326037 (2d Dist., Div. 5 Dec. 18, 2023) (unpublished).

            There, plaintiff brought ADA, Unruh Act, and Health & Safety Act claims relating to disability access issues.  Although plaintiff partially prevailed, the court substantially lowered fee and costs requests, awarding $42,688.50 in fees (out of around a $117,000 ask) and $3,028.15 (out of a $12,884.30 ask).  On appeal, plaintiff argued that more fees were required under the Unruh Act claim.  However, because there was no reporter’s transcript on the fee motion, it was unclear what fee entitlement statutes were at issue so that the lack of this record required an affirmance on appeal.

Consumer Statutes, Reasonableness Of Fees: Plaintiff Accepting CCP § 998 Settlement Offer In Lemon Law Case Was Properly Awarded Drastically Reduced Attorney’s Fees Where Inflated Billings Were Demonstrated

Higher Claimed Hourly Rates For Riverside Attorneys Properly Reduced, As Well As Inflated Work Effort Requests.

            In contrast to the Edmundson decision which we recently posted on, the 4/3 DCA did affirm a substantially reduced fee award under a lemon law case in Jacobs v. American Honda Motor Co., Inc., Case No. G062739 (4^th Dist., Div. 3 Dec. 8, 2023) (unpublished), with the facts and record being much different in degree.  Jacobs involved a substantial fee request after a CCP § 998 offer was accepted in a non-complex, not hugely contested litigation matter.  Given those facts and the fee “ask,” there are differences which led to a drastic cut in the fees, a determination affirmed by our local appellate court in an opinion authored by Justice Motoike.

            What happened in this case is that defendant in a Song-Beverly Act case, which has a fee shifting statute favoring the car purchaser, made a CCP § 998 offer including a component allowing attorney’s fees to be determined by the lower court (the base offer on the merits was $38,751.06).  Plaintiff accepted that offer, prompting his attorneys to file a fee request for $319,138.50 by the lead attorney and $23,530 by a secondary attorney, with the lead attorney claiming $675 per hour and secondary attorney claiming $650 per hour for a Riverside-venued matter.  The Riverside trial judge set $450 as the reasonable hourly rate for Riverside counsel, but he found lead attorney’s lodestar request was “grossly inflated” based on vague block billing and vague time entries in a routine case which did not involve a lot of pre-trial activity.   In the end, his fee request was reduced to $5,895 but the secondary attorney was granted total work effort but diminished by the lower hourly rate.

            The appellate court affirmed.  The hourly rate determinations were sustained based on the venue and the lower court’s observation of the work effort by plaintiff’s attorneys.  With respect to the big haircut for lead counsel’s fees, that was no abuse of discretion because the bad billing practices by counsel made it difficult to cipher reasonable work effort, resulting in a fee award which is substantially reduced or denied in entirety.  (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 695-696 (2016).)

SLAPP: Lower Court Had Jurisdiction After Plaintiffs’ Dismissal Of Their Complaint, With A SLAPP Motion Pending, To Award Fees To the Defense

However, Lower Court Had To Determine If SLAPP Motion Had Merits, Which It Did.

            In Mendez v. Flores, Case No. C095501 (3d Dist. Dec. 8, 2023) (unpublished), plaintiffs dismissed their complaint after the defense moved to SLAPP it.  The lower court awarded the defense $19,608 in SLAPP fees after determining it had jurisdiction to rule on the motion and deciding the dismissed SLAPP motion had merit.  The Third District affirmed.  Addressing an appellate court split in thinking on whether fees can be awarded to the defense without determining if the SLAPP fees had merit, the Third District aligned with the majority of decisions on the issue, holding that fees could only be awarded if there is a merits “favorable” threshold determination.  (Citing numerous decisions, especially Liu v. Moore, 69 Cal.App.4^th 745, 752 (1999).)  Because appellants presented an inadequate record to challenge the amount of the award, that was affirmed, with the appellate court also remanding for the lower court to award further SLAPP fees to the defense for prevailing on appeal. 

Laffey Matrix, Lodestar, Reasonableness Of Fees: Lower Court Erred By Too Drastically Cutting Prevailing Party Contractual Fee Request From Around $700,000 To $198,445

Lower Court Did Not Support Reduced Hourly Rate And Substantial Time Cuts.

Free haircut on Saturday morning in W.M. Scott's general store. Farrington. Chatham County, North Carolina. Library of Congress. Marion Post Wolcott, photographer.  September 1940.

            Based on the Ninth Circuit’s Moreno decision which we have cited many times, federal courts in California need to support cuts over 10% with detailed reasoning.  However, California state courts do not have the same strictness in issuing fee awards because no statement of decision is required.  However, that does not mean that an appellate court will not reverse a reduced fee award where the panel perceives those certain cuts, in hourly rates and time requested, are unfairly slashed.   Edmundson v. Bonilla, Case Nos. G062039 et al. (4^th Dist., Div. 3 Dec. 7, 2023) (unpublished) is just that situation, authored by Justice Sanchez.

            In Edmundson, after fee entitlement was sustained by the appellate court (construing written documents and oral agreements together as an integrated whole), the lower court reduced the requested $700,000 in fees to $198,445, a significant cut based on reductions in claiming attorney’s hourly rate (only allowing $345 in Orange County) and for time claimed (mainly for block billing, duplicative work, and work that was not used such as unfiled in limine motions).  The appellate court reversed and remanded.

            The 4/3 DCA panel decided that the “haircut” in fees was too much and an abuse of discretion—“[b]ut a haircut was in order, not a decapitation” even under a deferential review standard relating to amount of fees awarded.  With respect to the $345 hourly rate awarded to counsel, that was too low based on the Laffey Matrix and other evidence which showed this was a lower rate charged to the client, rather than the true market rate applicable under a lodestar analysis.  On the time reduction—which varied between 34-54.3% depending on what numbers you used—this, too, was excessive according to the reviewing court.  The block billed entries were not truly block billed, except for minor ones.  It was error to not allow billing for some unfiled tasks given that some “dead ends” are compensable, citing Vargas v. Howell, 949 F.3d 1188, 1194, 1198 (9^th Cir. 2020).  The lower court did reasonably reduce for excessive number of inter-conferencing sessions and emails.  Not to be forgotten was that plaintiffs’ attorney obtained a compensatory award of $980,988.83 in a challenging case, which reinforced why a “richer” fee award was in order. 

Family Law: Fee Awards To Ex-Wife Under Section 271 And Minors’ Counsel Under Section 3153 Were Affirmed On Appeal

Ex-Husband Did Have Ability To Pay, With The Lower Court Structuring The Fee Recovery To Ameliorate Hardship.

            Acting Presiding Justice Bedsworth, on behalf of a 3-0 panel, authored Marriage of Lou and Ma, Case No. G061015 et al. (4^th Dist., Div. 3 Dec. 6, 2023) (unpublished).  Ex-husband in a dissolution case appealed an award of attorney’ fees to ex-wife of $63,489 (principally under Family Code section 271) and to minors’ counsel under Family Code section 3153 (which section allows for such an award considering the parties’ ability to pay).  However, the lower court structured the award so that wife’s fees should be satisfied through equalization adjustment for the value of the marital residence and so that minors’ counsel could be paid from liquidating stocks/bonds such that only $7,260 had to be paid in cash.  The 4/3 DCA panel affirmed.  The record showed ex-husband ran up the cost of the litigation, with the lower court finding that “everything including the kitchen sink was tossed into this litigation” by ex-husband.  With respect to ex-husband’s argument he did not have the ability to pay, the lower court’s structuring of how the fee orders were to be paid was reasonable, with ex-husband having plenty of disposable cash and bitcoin resources to satisfy the cash component of the award to minors’ counsel.

Costs, Employment: Employee Assessed With Routine Costs For Not Prevailing On Labor Code Violations, Intertwined With Other Claims, Obtained Reversal As A Matter Of Law Where Employee’s Case Was Not Brought In Bad Faith

Where Wage Claims Are Not Brought In Bad Faith, Intertwined Claims Do Not Give Rise To Costs Exposure.

            In Schwade v. South Pasadena Rehabilitation Center, LLC, Case No. B318644 (2d Dist., Div. 2 Dec. 5, 2023) (unpublished), employee lost a wage/hour claim lawsuit, although involving intertwined claims, on a summary judgment.  The lower court assessed routine costs against employee to the tune of $11,937.63 even after finding that (1) employee’s wage hour claims were not brought in bad faith, and (2) the ancillary claims were intertwined with the wage hour claims.

            The appellate court reversed as a matter of law, based on the lower court’s findings.  The reversal was driven by case law indicating that a plaintiff employee should not be assessed with these costs unless bad faith is determined on intertwined wage hour claims, case law/Labor Code provisions prevailing over general cost shifting statutes of a more general nature.  (Dane Elec. Corp., USA v. Bodokh, 33 Cal.App.5^th 761, 774-775 (2019).) 

Costs, Probate: Probate Code Section 1002 Takes Precedence Over General CCP § 1032(b) Prevailing Party Provisions

Probate Court Has Discretion To Determine Whether Costs Should Be Awarded, Who Should Pay Them, And Who Should Recover Them.

            Peccia v. Guerrero, Case No. B316614 (2d Dist., Div. 3 Dec. 4, 2023) (unpublished) is an opinion reminding practitioners that specific Probate Code provisions may take precedence over more general CCP prevailing party statutory provisions.

            In this case, petitioners and respondents got involved in probate disputes involving two different subtrusts, with each side partially prevailing on certain claims relating to the different subtrusts.  The lower court determined that no attorney’s fees or costs should be awarded to either side.  One of the petitioners appealed, but he did not obtain a change in result.

Under Probate Code section 1000(a), the “rules of practice applicable to civil actions” apply to proceedings under the Probate Code, “[e]xcept to the extent that this code provides applicable rules.” Section 1002 provides: “Unless it is otherwise provided by this code or by rules adopted by the Judicial Council, either the superior court or the court on appeal may, in its discretion, order costs to be paid by any party to the proceedings, or out of the assets of the estate, as justice may require.”  Case law holds that, notwithstanding CCP § 1032(b) mandatory prevailing party costs provisions generally applicable, the probate court has specialized discretion to determine whether costs should be awarded, who pays them, and who recovers them.  (Hollaway v. Edwards, 68 Cal.App.4^th 94, 99 (1998).)  In this instance, given partially prevailing parties on both sides of the “litigation coin,” the probate court did not abuse its discretion in not awarding CCP prevailing party costs to appellant.

Deeds Of Trust, Section 1717: $31,617 Attorney’s Fees Award Under Deed Of Trust Fees Clause Affirmed Against A Nonsignatory Who Was An Alter Ego In A Fraudulent Conveyance DOT Case

DOT Fees Clause Was Broad, Encompassing The Tort Claim For Fraudulent Conveyance. 

            In the deed of trust area, whether a lender can obtain recovery of contractual attorney’s fees after prevailing in a case depends on its breadth:  if it is broad, lender likely prevails; if it is narrow (such as only saying the fees get added to the loan debt), the lender likely loses.

            Lender was on the “happy” side of that equation in Northpoint Capital Fund, LLC v. McClenahan, Case No. H050514 (6^th Dist. Nov. 30, 2023) (unpublished) based on a broadly worded DOT fees clause.

            There, lender prevailed in a matter alleging that certain defendants conspired or aided and abetted in a scheme to fraudulently transfer a deed of trust, which the lower court agreed with by vacating the subsequent DOT and ruling in favor of lender.   McClenahan, one of the parties, was found to be an alter ego, even though he did not sign the fraudulent DOT.  The original DOT had a broad contractual fees clause that the borrower agreed to pay reasonable attorney’s fees “in any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee.”  The lower court awarded lender $31,617 in attorney’s fees under the DOT fees clause against McClenahan.

            McClenahan’s efforts to overturn the fee award were unsuccessful.  Because he was established as the alter ego of the borrower, McClenahan faced fee exposure under Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129 (1979) [our Leading Case #5].  Because Civil Code section 1717 “on the contract” language is construed liberally, the breadth of the clause encompassed the fraudulent DOT conveyance win by lender.

Appealability, Private Attorney General: Additional Defendants Were Determined To Be “Opposing Parties” Such That They Should Have Been Added As Liable For A Private Attorney General Fee Award

Additional Defendants Were Unified In Interest With Other Defendants Subject To The Fee Award.

            To recover attorney’s fees under the private attorney general statute, CCP § 1021.5, the plaintiff must recover against “opposing parties.”  Taft v. Salinas, Case No. D081025 (4^th Dist., Div. 1 Nov. 30, 2023) (unpublished) considered the scope of that language where all defendants seriously contested the case and were unified in interest, but the lower court denied fees against certain defendants because it did not consider them to be alter egos.

            Taft involved a case by a plaintiff against certain puppy stores and their owners for retail sales of non-rescue puppies which were alleged to come from breeding mills.  Plaintiff obtained a preliminary injunction, although plaintiff dismissed without prejudice after defendants moved to compel arbitration.  Plaintiff moved for attorney’s fees under Civil Code § 1717 and CCP § 1021.5, with the lower court awarding $46,500 under the private attorney general against the puppy stores but not against the owners.  Plaintiff appealed on the narrow ground that the omitted defendants should have been liable for the private attorney general fee award.

            Plaintiff won on appeal.  However, there was a jurisdictional issue to be resolved before the merits were reached.

            Defendants argued that the post-dismissal fee award was not appealable after the dismissal without prejudice.  The 4/1 DCA disagreed, finding such an award was no different from a post-dismissal routine costs award found appealable (and found persuasive by this panel through its reasoning) in Gassner v. Stasa, 30 Cal.App.5^th 346, 354-355 (2018).

            On the merits, the appellate court found that the omitted defendants were “opposing parties” responsible for the fee award under CCP § 1021.5 because they vigorously contested at all stages of the case and they were unified in interest with the defendants initially found liable for the fee award.