CALIFORNIA ATTORNEY'S FEES

Reasonableness Of Fees: In IDEA Case, District Court Did Award Fees, Albeit Reduced—Our First Artificial Intelligence Post!

District Judge Disregarded AI Computation On Hourly Rates.

            Okay, everyone following our blog, we have our first Artificial Intelligence (AI) case on a fee motion.

            In J.G. v. New York City Dept. of Education, No. 23 Civ. 949 (PAE), S.D.N.Y. (Doc. 32, 2/22/2024), the district court was considering a fee request to a prevailing party after two administrative hearings under the Individuals with Disabilities Education Act (IDEA) fee-shifting statute.  The requesting party asked for $113,484.62 in fees and costs, with the district court ultimately awarding $53,050.13 after the party eschewed a $54,300 settlement offer.  In reaching its result (after acknowledging IDEA is a niche legal area not akin to more generalized practices), what the district court did do was to reject an artificial intelligence analysis of hourly rates as being unpersuasive and unreliable.  In so doing, it quoted other cases determining that AI data needed to be really scrutinized by the attorneys relying on it before submission of that data to the court.

Fee Clause Interpretation, Prevailing Party, Section 1717: Lower Court Erroneously Denied Attorney’s Fees To Plaintiff Who Obtained A Majority Of What She Wanted In A Loan Agreement Case With A Fees Clause Only Covering A Judicial Foreclosure Case

Under Civil Code Section 1717, Lack of Recital Saying Contract Was Negotiated/Executed With Counsel Representation Kept The Clause From Applying Narrowly, With The Matter Remanded For Purposes Of Determining If Plaintiff Was The Prevailing Party For Fees Even Though Plaintiff Did Not Pursue Routine Costs Recovery.

            In Andrade v. Western Riverside Council of Governments, Case No. D080978 (4^th Dist., Div. 1 Feb. 20, 2024) (published), plaintiff filed a lawsuit against the Council and others claiming she had been fraudulently enrolled in a PACE energy program resulting in a lien and increased property tax assessments, pleading multiple contractual theories for rescission, restitution, damages, and declarations that the agreements were partially or wholly unenforceable.  After an investigation through a state department confirming contractor fraud, the Council voluntarily released its lien and reimbursed plaintiff for the increased property tax assessments.  Plaintiff obtained much of the relief she wanted through Council’s actions, but never obtained a declaration that the agreements were unenforceable.  The operative loan agreements between plaintiff and Council had a narrow fees clause applying only to a judicial foreclosure action prosecuted by Council, something which did not occur.  The lower court denied plaintiff’s attorney’s fees request, determining that the fees clauses did not apply because no judicial foreclosure action was pursued by Council.  (Plaintiff ultimately did not pursue a costs recovery.)

            Initially, the appellate court agreed that the action was a contract because it concerned whether the loan agreements were valid and enforceable, with plaintiff’s theory of invalidating the contracts being “on the contract” under Civil Code section 1717 and with dicta in Xuereb/Dintino decisions not altering that conclusion.  Second, although acknowledging that the fees clause was narrow and applied only to judicial foreclosure actions, the 4/1 DCA panel relied on section 1717(a) to conclude that the fee provision applies to the entire contract unless the parties expressly recite that the agreement was negotiated/executed by parties represented by counsel somewhere in the contract or fees clause—that recital was not present, and the appellate court deemed that this recital was necessary to prevent the agreement from being a “lopsided arrangement that section 1717 prohibits.”  Finally, given its prior conclusions, the appellate court remanded to have the lower court determine if plaintiff “prevailed” for fees under section 1717:  after all, even though she won a lot, she did not prevail across-the-board such that a pragmatic inquiry was necessary on remand.

BLOG OBSERVATION—This case suggests that in fee clauses, transactional attorneys need to include the negotiation/execution recital or be at risk that a narrow fee clause will not be enforced where the fee motion issues on based on the entire contract.  Huge drafting tip here.

In The News: Epic Games Mounts Substantial Opposition To Apple’s $73.4 Million Fee Reimbursement Request For Apple’s Prevailing On Antitrust Claims And “Largely Uncontested” Contractual Breach Claims

Epic Games Claims Antitrust Fees Not Recoverable, Contractual Breach Claims Not Segregated So As To Be Recoverable, And “Fees On Fees” Not Recoverable Due To A Failure To Meet And Confer Before Filing Of The Substantial Fee Request.

            In Epic Games, Inc. v. Apple Inc., Case No. 4-20-CV-05640-YGR-TSH (N.D. Cal., Doc. No 886, dated Feb. 16, 2023), Epic Games is pushing back at a $73.4 million fee reimbursement request by Apple after Epic Games did not prevail on certain antitrust and breach of contract claims.  First, Epic Games argues that fees incurred by Apple in the defense of antitrust claims are precluded altogether by Carver v. Chevron U.S.A., Inc., 119 Cal.App.4^th 498 (2004), which has been applied to federal antitrust claims says Epic Games in its opposition arguments.  Second, fees for a “largely uncontested” contractual breach claim were not recoverable because Apple did not attempt to segregate the fees from those which were incurred on the antitrust claim.  Third, “fees on fees”—the work on the fees motion—were not recoverable because Apple did not meet and confer on the fee motion before it was filed.

Consumer Statutes: 2/4 DCA Reverses Trial Court’s Denial For Untimely Filing Of $119,470.98 Fees Motion Made By Prevailing Song-Beverly Plaintiff

Trial Court Violated Rules Of Court, Rule 3.1702, By Shortening Deadline For Plaintiff To File His Attorney’s Fee Motion.

            In Javidian v. Subaru of America, Case No. B322136 (2d Dist., Div. 4 February 16, 2024) (unpublished), Song-Beverly Plaintiff and Defendant reached a verbal settlement through mediation – with the parties agreeing the terms would be memorialized through a Code Civ. Proc. § 998 offer to be served by Plaintiff.  During a final status conference that same day, the trial court was notified of the agreement.  As a result, the trial court vacated the trial date and set a status conference.  However, the 998 offer was not finalized and executed by the date of the status conference, and the trial court set an order to show cause hearing, for less than two months out, on why the case should not be dismissed.  Additionally, the trial court ordered that any motion for attorney fees be filed and heard before the OSC hearing.  At the OSC hearing, the trial court was notified that Defendant accepted Plaintiff’s 998 offer, and the trial court dismissed Plaintiff’s first amended complaint but retained jurisdiction to enforce the terms of the settlement.  When Plaintiff later filed his motion for $119,470.98 in attorney’s fees, the trial court denied it as untimely. 

            Plaintiff appealed, arguing the trial court violated Rules of Court, rule 3.1702 by setting the deadline for him to file his fees motion on a date that fell before the entry of dismissal of his first amended complaint.  The 2/4 DCA agreed and reversed.  Rule 3.1702 expressly authorizes a trial court for good cause to extend the deadline for filing a fee motion, but does not authorize it to shorten the deadline.  Plaintiff’s motion was timely under Rule 3.1702.

            Although Plaintiff first raised this Rule 3.1702 issue on appeal, the 2/4 DCA exercised its discretion in considering his argument because his appeal raised a purely legal question to which Defendant responded. 

Consumer Statutes, Special Fee Shifting Statutes: $264,440 In Attorney’s Fees Affirmed Against Bond Surety Defendant That Issued $50,000 Bond To Auto Dealer Who Used Fraudulent Tactics To Sell A Used Car To Plaintiff

Plaintiff Was Unable to Collect Arbitration Award For Violations Of The Consumers Legal Remedies Act, Leading Her To Successfully Seek Summary Judgment Against Surety Under Veh. Code Section 11711 For Dealership’s Fraudulent Representation

            In Gonzalez v. Hudson Insurance Co., Case Nos. D080166/D081686 (4^th Dist., Div. 1 February 13, 2024) (unpublished), auto dealer sold a car to plaintiff and falsely represented to her that the car had been in no accidents, had not sustained prior collision damage, and had no frame damage.  When Plaintiff became aware that auto dealer’s representations were fraudulent, she sued for violations of the Consumers Legal Remedies Act, among other causes of action, and received an arbitration award against the auto dealer for each of her causes of action, including the fraud-based violations of the CLRA. 

            Plaintiff was unable to collect from the dealership – leading her to successfully seek summary judgment against the dealership’s bond surety under Veh. Code § 11711.  Plaintiff then moved for attorney’s fees and costs against bond surety – arguing that fees were mandatory under the CLRA because she had prevailed on her CLRA cause of action, and the bond surety’s liability was in line with the dealership’s liability.  The trial court agreed, and ordered a $264,440 fee award to Plaintiff, with $120,581 of the award from arbitration-related fees and the balance from post-arbitration fees with a 0.5 multiplier.

            Bond surety appealed both the summary judgment grant and the fees award, but provided no legal analysis and citation to the record to support its claim that the trial court erred in finding it liable on the bond/granting summary judgment – resulting in the 4/1 DCA affirming the summary judgment.

            As to the fees order, bond surety argued that section 11711 does not authorize a fees award, that the combined liability for damages and attorney’s fees exceeded the amount of the bond it issued the dealership, and that the trial court abused its discretion in calculating the fees award because it applied a 0.5 multiplier to the lodestar for the post-arbitration fees.

            The appellate panel was not persuaded.  Following the holdings in Harris v. Northwestern National Ins. Co. (1992) 6 Cal.App.4th 1061, Pierce v. Western Surety Co. (2012) 207 Cal.App.4th 83, and Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, the 4/1 DCA affirmed.  First, the fees were awarded under the CLRA, not section 11711, and as the prevailing plaintiff under the CLRA’s mandatory fee provision, Plaintiff was entitled to recover her attorney’s fees from the dealership as an item of costs.  Under Civ. Code § 2808, the liability of a surety is commensurate with that of the principal, meaning where the dealership was liable for fees as an item of costs based on conduct secured by the bond, so too was the surety – even where the award exceeds the amount of the bond.  As to the trial court’s application of the 0.5 multiplier, the panel found no abuse of discretion.

Employment, Fee Clause Interpretation, Prevailing Party, Settlement, Special Fee Shifting Statutes: Denial Of Labor Code Section 1194 Attorney Fees To Plaintiffs Who Incurred Post-Settlement Fees After Employer Breached The Settlement Agreement Reversed

Because The Fees Provision In The Parties’ Settlement Agreement Did Not Address Fees Incurred Post-Settlement, Plaintiffs Were Entitled To Recovery Under Section 1194, But Only As To Fees Incurred In Conducting Discovery And Litigating To Trial, Not In Enforcing The Settlement Agreement.

            In Lorta v. Bishop, Case No. G062166 (4^th Dist., Div. 3 February 13, 2024) (unpublished), five employees, who had sued their employer for recovery of wages, filed a motion seeking attorney fees of $331,261.25 – based on a $265,009 lodestar and a 1.25 multiplier – after employer failed to comply with the parties’ stipulation for settlement.  Plaintiffs incurred the fees post-settlement by conducting discovery and preparing for trial, and by enforcing the settlement agreement, and claimed entitlement to the fees under Labor Code sections 1194 and 226, and Code Civ. Proc. section 1021.5.  Defendant argued that because there was no trial or determination by the trial court on the merits of Plaintiffs’ claims, Plaintiffs were not prevailing parties under sections 1194, 226, and 1021.5, and not entitled to statutory fees.  Defendant further argued that Plaintiffs had prevailed only in enforcing the settlement agreement, which amounted to a breach of contract claim, and the settlement agreement provided that each party would bear its own fees and costs.  The trial court agreed and denied Plaintiffs’ motion for fees.

            Plaintiffs appealed and obtained a reversal and remand as to fee recovery under section 1194 – a one-way fee-shifting statute that allows employees to recover fees in a successful action for minimum wage or overtime. 

            In an opinion authored by Justice Sanchez, the 4/3 DCA found that the settlement agreement was silent as to any fees incurred after the settlement agreement – thereby entitling Plaintiffs to post-settlement attorney fees under section 1194 insofar as those fees were not incurred to enforce the settlement agreement.  In reaching this conclusion, the panel determined that the settlement agreement had the same effect as a judgment as defined under Code Civ. Proc., § 577 and constituted a recovery in a civil action within the meaning of section 1194.

Private Attorney General: Fifth District Affirms Denial Of Section 1021.5 Fees To Plaintiff Who Had A $1,036,728 Financial Incentive And $456,935.25 In Legal Fees.

Plaintiff’s Financial Incentive, That Far Outweighed The Incurred Costs Of Litigation, Warranted Denial Of Fees, And Plaintiff’s Analysis of Heron Bay Did Not Change That Factor.

            Recovery of attorney fees under California’s private attorney general doctrine, codified at CCP § 1021.5, is reserved for “litigants and attorneys who step forward to engage in public interest litigation when there are insufficient financial incentives to justify the litigation in economic terms.” (Broad Beach Geologic Hazard Abatement Dist. v. 31506 Victoria Point LLC (2022) 81 Cal.App.5^th 1068, 1095-1096.)

            This issue of financial incentive was front and center in Malaga County Water Dist. v. Central Valley Regional Water Quality Control Bd., Case No. F084746 (Fifth Dist., February 7, 2024) (unpublished).  There, Plaintiff appealed the lower court’s denial of its request for an award of attorney fees under § 1021.5, arguing that the lower court had applied the wrong legal standard in making its determination, and had abused its discretion in setting the potential value of financial gain Plaintiff achieved through the litigation.

            The Fifth District disagreed with both contentions and affirmed.

            First, Plaintiff’s primary challenge – that the lower court applied the wrong standard – appeared to be based on its interpretation of the findings in Heron Bay Homeowners Assn. v. City of San Leandro (2018) 19 Cal.App.5th 376.  Plaintiff argued that the reversal of a $1,036,728 civil penalty against it amounted to an incentive that was too speculative to be counted because Plaintiff was possibly facing another, potentially larger, penalty subsequent to a new administrative hearing.  However, the Fifth District found that the principle in Heron Bay and others cited by Plaintiff was consistent – that the trial court should consider whether the evidence is speculative or definitive in its analysis and may discount evidence of speculative financial motivations.  To this end, the lower court had been presented with and properly considered arguments that Plaintiff’s incentive was speculative, but found that there was a direct, immediate and substantial financial benefit to Plaintiff in the form of the reversal of a civil penalty that would have otherwise depleted Plaintiff’s finances. 

            Likewise, the appellate panel found no abuse of discretion in the lower court’s valuation of Plaintiff’s financial motivation in bringing this case.  Based on the evidence, the lower court reasonably found that the civil penalty assessed against Plaintiff was a threat to its ability to operate and provided Plaintiff with sufficient financial incentive for litigating.

Costs, Employment: Neeble-Diamond Opinion Now Certified For Publication

Prevailing FEHA Defendant Must Bring A Motion To Obtain Discretionary Costs Because Losing Plaintiff’s Case Must Be Shown To Be Objectively Frivolous In Nature.

            On January 15, 2024, we posted on Neeble-Diamond v. Hotel California by the Sea, LLC, Case No. G061425, which was issued on January 11, 2024 as an unpublished opinion.  We can now report it was certified for publication on February 5, 2024.   The opinion holds that a prevailing FEHA defendant cannot recover costs solely through a costs memorandum, because all costs are discretionary and need to have a noticed motion to decide if losing plaintiff’s case was objectively frivolous.  Without that showing on a noticed motion, a costs memo is not the proper vehicle for the defense to pursue costs in this area. 

In The News . . . . Wells Fargo’s Legal Specialty Group Shows Big U.S. Law Firm Raised Billable Hourly Rates By 8.3% In 2023

That Factor, Combined With Holding Down Expenses, Led To More Profits Also.

            Wells Fargo’s Legal Specialty Group, after surveying more than 130 U.S. big firms inclusive of 70 of the top 100 highest grossing U.S. firms, has reported that for 2023, these firms increased billable hourly rates by 8.3% over 2022 rates.  That led to increased profits for these firms in 2023, on average.

Private Attorney General: Lower Court’s Denial Of CCP § 1021.5 Fees Reversed And Remanded

Insured Did Vindicate Important Rights For California Insureds By Obtaining Published Affirmance Of An Insured’s Right To Videotape Insurer’s Participants In An EUO.

            In Myasnyankin v. Nationwide Mutual Ins. Co., Case No. A166946 (1^st Dist., Div. 5 Jan. 30, 2024) (partially published), by a 2-1 vote, the appellate court affirmed a lower court’s determination that an insured has the right to videotape insurer’s participants in an examination under oath (EUO) which usually occurs in connection with claim investigations.

However, the lower court denied CCP § 1021.5 attorney’s fees to the prevailing insured.

            The 1/5 DCA reversed and remanded for purposes of determining the amount of a fee award to insured in the unpublished part of the opinion. An important right having a significant benefit existed because insured won a published affirmance of an important issue which benefitted all California insureds.  Because no monetary judgment was possible, the costs of litigation per se transcended the monetary upside to insured under Whitley.