CALIFORNIA ATTORNEY'S FEES

Appeal Sanctions: SLAPP Denial Appeal Was Not Frivolous

Trial Court Asked For Discussion On Five Issues And Interactive Oral Argument, Which Negated That The Motion Was Frivolous.

               In Gazal v. Echeverry, Case No. B327668 (2d Dist., Div. 8 Mar. 29, 2024) (published), defendants lost a SLAPP motion and then appealed, with the appeal being unsuccessful. Plaintiff filed a motion to recover $106,730 in monetary sanctions for a frivolous appeal.  The appellate court rejected plaintiff’s request, reasoning that the trial court invited argument on five issues and noted the interactive oral argument on the motion—which belied that the motion was frivolous or something no reasonable attorney would have ever brought.

Appealability, SLAPP: Aggrieved Plaintiff Properly Prosecuted A Second Appeal From A SLAPP Fee Order Given Conflicting Intermediate Appellate Authority On The Issue

Opinion Validates Our Recommendation In Many Posts To Separately Appeal An Adverse Fee Order Or Appeal Both Rulings In A Combined Appeal If Possible.

               In Williams v. Doctors Med. Center of Modesto, Inc., Case Nos. F084700 et al. (5^th Dist. Mar. 27, 2024) (published), plaintiff separately appealed the granting of a SLAPP motion and a subsequent order granting fees to the successful defendants.  The defense argued that the second appeal was unnecessary because any fee award would automatically fall if the merits SLAPP ruling was reversed.  The Fifth District found nothing improper about the filing of the second appeal, something we bloggers have suggested in many prior posts.

               The appellate court observed that there was conflicting intermediate appellate authority on the treatment of dependent fee awards.  Some courts have held that they can reverse a fee award from an underlying judgment even if the fee award was not separately appealed.  (See, e.g., Ulkarim v. Westfield LLC, 227 Cal.App.4th 1266, 1282 (2014); Harris v. Wachovia Mortgage, FSB, 185 Cal.App.4th 1018, 1027 (2010).) Other courts held that they have authority to reverse a fee award only when the judgment and fee award are appealed together in a single appeal or appealed separately in two appeals. (E.g., Nellie Gail Ranch Owners Assn. v. McMullin, 4 Cal.App.5th 982, 1007–1008 (2016); Allen v. Smith, 94 Cal.App.4th 1270, 1284 (2002).)  Additionally, some courts have noted that “ ‘ “[w]hen a party wishes to challenge both a final judgment and a postjudgment costs/attorney fee order, the normal procedure is to file two separate appeals: one from the final judgment, and a second from the postjudmgent order.” ’ ” (Doe v. Westmont College, 60 Cal.App.5th 753, 762 (2021) [quoting Torres v. City of San Diego,154 Cal.App.4th 214, 222 (2007)].)

               Better safe than sorry—do a combined appeal of the two rulings or separately appeal the fee order if there is some delay in the fee ruling so as to make two appeals necessary.

Arbitration, Requests For Admission: Arbitrator Award Of RFA Costs Of Proof Sanctions Reversed In Review Of Uninsured Motorist Arbitration Proceedings

Only A Trial Judge Can Order Discovery Sanctions Under Uninsured Motorist Arbitration.

               We did know that uninsured motorist arbitrations are a niche area for practitioners in the area.  That is confirmed by the result in Ourfali v. 21^st Century Ins. Co., Case No. B324150 (2d Dist., Div. 4 Mar. 27, 2024) (unpublished).  There, in an uninsured motorist arbitration, an arbitrator awarded CCP § 2033.420 costs of proof sanctions of $34,789.50 in connection with some RFA denials against defendant insurer, even though the insurance policy arbitration clause stated that all other issues but legal entitlement to damages and the damages amount had to be decided by a superior court.  The superior court vacated the costs of proof sanctions, a determination affirmed by the appellate court.  It found that only the superior court had jurisdiction to hear discovery matters arising under uninsured motorist arbitrations.  (Miranda v. 21^st Century Ins. Co., 117 Cal.App.4^th 913, 926 (2004); see also Storm v. Standard Fire Ins. Co., 52 Cal.App.5^th 636, 640, 648 (2020).)

Private Attorney General, Section 998: Plaintiff’s Jury Trial Win Almost Completely Absorbed By Successful Defense 998 Offer After Reduction For Post-Offer Expenses

Also, Plaintiff’s Suit Benefitted Herself, So No Section 1021.5 Fees Were Warranted.

               Nairobi v. Watkins, Case Nos. A164665 et al. (1^st Dist., Div. 3 Mar. 28, 2024) (unpublished) shows the potency of a successful defense CCP § 998 offer:  plaintiff’s $101,768.89 jury award got reduced to just $3,772.87.  The lower court also denied plaintiff’s CCP § 1021.5 fee request because the defense did not dispute needing to comply with an Oakland inhabitability municipal ordinance and plaintiff’s suit only sought money for herself alone.  The appellate court affirmed.  The trial judge’s calculation of what plaintiff won was no abuse of discretion because plaintiff failed to develop an adequate record, especially not including the special verdict to show how damages were allocated by jurors.  Also, the lower court’s conclusions on the 1021.5 fee request were justified.

Costs, Employment: Labor Code § 1194(a) Mandatory Prevailing Employee Statute Prevails Over Discretionary Routine Costs Provision Giving Discretion To Deny Fees For Limited Success

Reasonableness Of Fees Will Be An Issue On Remand.

               Justice Viramontes, in Gramajo v. Joe’s Pizza on Sunset, Inc., Case Nos. B322697 et al. (2d Dist., Div. 8 Mar. 25, 2024) (published), confronted a situation where an employee recovering $7,659.93 for minimum wage and overtime claims in a long jury trial then sought $296,920 in Labor Code § 1194(a) prevailing employee fees.  The trial court denied fees entirely as unreasonable under CCP § 1033(a) which gives lower courts discretion to deny prevailing plaintiffs their litigation costs when plaintiffs file their case as an unlimited civil case but only recover an amount available in a limited case.  The 2/8 DCA panel reversed, finding the Labor Code provision was mandatory and entitled employees to reasonable litigation costs irrespective of the amounts recovered.  However, the panel expressed no opinion on the reasonableness of the fees, with the code provisions irreconcilable such that the Labor Code provision prevailed in this context.  In doing so, the appellate court narrowed Chavez to a FEHA situation (where fees are discretionary), but not a mandatory fee shifting situation.

Ethics, Retainer Agreements: Attorneys Could Not Keep Unearned Portion Of Fees In Flat Fee Retainer, While Client Could Not Force Disgorgement Of Pre-Withdrawal Fees Earned By Discharged Attorneys

Rules Of Professional Conduct And Wording Of Retainer Agreement Guided The Result.

               Both ex-attorneys and ex-client took draconian positions in a case involving what fees were owed by ex-client under a flat fee retainer agreement involving criminal and divorce proceedings.  Attorneys claimed they were entitled to the whole $350,000 retainer even though they did not complete all specified work under the retainer agreement before withdrawal from representation.  On the other side, ex-client claimed the whole $350,000 was subject to disgorgement based on $425,000 in fees he paid to replacement attorneys.  Neither side got what they wished for in Noell v. Kenner & Greenfield, Case No. B316818 (2d Dist., Div. 1 Mar. 22, 2024) (unpublished).

               The retainer agreement contained a flat fee provision, a statement of Attorneys’ hourly rates, a specification of the work to be performed by Attorneys, and a clause indicating that the agreement allowed Attorneys to receive all fees, costs and expenses for services rendered up to and including the date of dismissal.  The lower court, in a bench trial, found that ex-client had overpaid $52,750 because certain tasks were not completed by ex-attorneys, but rejected disgorgement of the entire $350,000 retainer.  However, the trial judge did not accept ex-attorneys’ claim that they could keep the entire flat retainer, reasoning that the retainer agreement allowed for payment of fees and other items rendered through the date of dismissal.  Both sides appealed.

               The 2/1 DCA affirmed, especially given the lack of a reporter’s transcript of the bench trial testimony.  Rule 1.16 of the State Bar Rules of Professional Conduct provides that upon termination for any reason, a lawyer shall refund any part of a fee or expense paid in advance that the lawyer did not earn or incur—which resolved ex-attorneys’ appeal.  On ex-client’s cross-appeal, the appellate court decided the retainer agreement allowed ex-attorneys to charge for fees and expenses before termination or dismissal and further did not make ex-attorneys responsible for future relationships with new attorneys. 

Arbitration: Former Employer Could Not Revive Arbitration Demand Against Ex-Employee After Paying Late Following Expiration Of The CCP § 1287.97 30-Day Deadline

Deadline Is Strict; § 1287.97 Is Not Preempted By The FAA.

               In Jane Doe v. Lawyers for Employee and Consumers Rights, Case No. B330052 (2d Dist., Div. 6 Mar. 21, 2024) (unpublished), former employer sought to press arbitration against ex-employee although it paid late arbitration expenses in derogation of the 30-day deadline under CCP § 1287.97.  The trial court denied employer’s motion to compel and imposed sanctions under § 1287.97(d).  The appellate court affirmed.

               Section 1287.97’s payment deadline is strict and unforgiving.  Payment after the deadline could not resuscitate the situation.  Further, the lower court, not an arbitrator, gets to decide this issue.  (Espinoza v. Superior Court, 83 Cal.App.5^th 761, 787 (2002); Cvejic v. Skyview Capital, LLC, 92 Cal.App.5^th 1073, 1078-1079 (2023).)  Finally, section 1287.97 is not preempted by the Federal Arbitration Act.  (Espinoza, 83 Cal.App.5^th at 771.) 

Family Law: 271 Sanctions Award Remanded Because It Was Unclear If Family Law Judge Considered Litigant’s Ability To Pay

Family Code Section 271(a) Mandates Consideration Of Ability To Pay.

               Although we have posted on this before, Family Code section 271(a) mandates that a family law judge takes into consideration a litigant’s ability to pay when assessing section 271 sanctions.  In Jayasuriya v. Jayasuriya, Case Nos. A166864 et al. (1^st Dist., div. 3 Mar. 20, 2024) (unpublished), a $2,000 sanctions award against an ex-husband was reversed and remanded because it was unclear if the family law judge considered his ability to pay. 

Ethics, Referral Agreements: Joint Venture Agreement Between Two Firms, Where One Firm Failed To Register As A Professional Law Corporation, Was Not Unenforceable As Against Public Policy

No Clients Were Harmed, So Enforcing The Agreement Was Fine Under The Circumstances.

               In Liberty Law Office, Inc. v. The Bloom Firm, Case Nos. A165269 et al. (1^st Dist., Div. 1 Mar. 20, 2024) (unpublished; opn. modified and rehearing denied), arbitrators, the lower court, and the appellate court all agreed that a Joint Venture Agreement (JVA) between two firms, even though The Bloom Firm did not properly register as a professional law corporation as required by statutes, was not unenforceable as against public policy.  Except in the unlicensed contractor area, not all contracts entered into by unlicensed entities are automatically void.  Here, registration was really for tax and personal liability protection for the firm, and the record showed no clients were harmed under the JVA—so there was no justification to declare the contract unenforceable under the operative facts.

Homeowner Associations: $156,476.33 Is The Fees/Costs Award Against An In Pro Per Plaintiff Who Lost A Demurrer To The HOA And A Subsequent Appeal

Fee Entitlement Was Justified Under Davis-Stirling Act And Vexatious Litigant Statutes.

               We have posted many times on how attorney’s fees and costs are the “tail that wags the dog in litigation” in homeowner-HOA disputes, resulting in hefty awards for the prevailing party or resulting in a large expenditure fees even though no one is deemed to have prevailed.    Harter v. Rancho Rios Homeowners Assn., Case No. D081285 (4^th Dist., Div. 1 Mar. 20, 2024) (unpublished) is an example of this for a non-prevailing, in pro per plaintiff.

               Plaintiff, who was declared to be a vexatious litigant and was required to post $50,000 as security, lost a demurrer successfully brought by HOA to his lawsuit.  The trial court awarded HOA prevailing party fees of $43,703.18.   Homeowner unsuccessfully appealed, which resulted in the grant of a fees/costs in HOA’s favor to the tune of $156,476.33 (inclusive of the $43,703.18 prior award) and an order to release the $50,000 security to partially satisfy the fee award.   Plaintiff again appealed.

               Unfortunately for him, plaintiff lost.  The appellate court found two bases for fee entitlement:  the Davis-Stirling Act (Civil Code § 5975(c)) and the vexatious litigant statutes (CCP §§ 391(c), 391.3).  The fee award was found to be no abuse of the lower court’s discretion, and the denial of a continuance request was not erroneous under the circumstances.

Trade Secrets: Significantly Reduced $272,325.05 Fee Award Affirmed On Appeal

Both Objective And Subjective Prongs Of Fee Entitlement Were Satisfied.

               In Reilly Financial Advisors, LLC v. Cariani, Case No. D081870 (4^th Dist., Div. 1 Mar. 19. 2024) (unpublished), the Court of Appeal faced confronting the propriety of a significantly reduced fee award of $272.325.05 in a trade secret misappropriation case after plaintiff former employer filed a dismissal against two defendant former employees in the face of a summary judgment motion which plaintiff did not oppose.  Their appeal of the fee award under Civil Code section 3426.4 was affirmed.

               This case, like many, is fact intensive.  That puts a deferential standard of review in play.  On the objective prong of section 3426.4, plaintiff only had suspicions of misappropriation, but not evidence of misappropriation—that was insufficient, especially where defendants only sent an announcement of relocating (which, if done correctly, is very proper in this area of the law).  With respect to the subjective bad faith prong, plaintiff failed to undertake an investigation to determine if there was misappropriation beyond suspicions, bolstered by bringing lawsuits against other former employees on the same grounds, all circumstantial evidence of animus which could be relied on by the lower court.   All said, fee award affirmed.

Undertaking: Appellate Court Reversed Lower Court’s Imposition Of A $500,000 Undertaking For Costs And Damages Under CCP § 529.2

Case Involved A Challenge To A Referendum Denial Decision Under The Elections Code, Not A Direct Challenge To A Housing Project.

               Move Eden Housing v. City of Livermore, Case No. A167346 (1^st Dist., Div. 5 Mar. 15, 2024) (partially published; undertaking discussion published) involved a superior court’s denial of a writ mandate petition by plaintiffs to obtain Livermore’s processing of their proposed referendum in accordance with the Elections Code, with the proposed referendum challenging City Council’s agreement between city and a developer for development of housing in downtown Livermore.  The lower court also ordered plaintiffs to post an undertaking of $500,000 in accordance with CCP § 529.2.  Plaintiffs, on appeal, obtained a reversal of both orders.

               Section 529.2 provides that a defendant in a civil action brought by any plaintiff to challenge a low/moderate-income housing project may request an order requiring plaintiff to furnish a undertaking for costs and damages incurred by defendant at the conclusion of the action as a result of a delay in carrying out the development project, with the defendant having to show both that the action was brought in bad faith/for delay in thwarting the project and the plaintiff will not suffer under economic hardship in filing the undertaking.

               The undertaking was erroneous because plaintiffs’ action was to enforce the provisions of the Elections Code rather than a direct challenge to the housing project.  The proposed referendum did challenge the project, but the action itself was not a challenge to the project.  Although real party in interest developer analogized plaintiff’s action to a CEQA action, that analogy was flawed because CEQA actions are directly within the statute—unlike the referendum action brought by plaintiffs.

Costs: Teacher Losing Administrative Mandamus Proceeding Was Liable For $3,951.74 In Routine Costs

His Claim Of Indigency Was An Immaterial Consideration.

               In Kissner v. Loma Prieta Joint Union School Dist., Case No. H050873 et al. (6^th Dist. Mar. 15, 2024) (unpublished), petitioner teacher challenged his layoff under the Education Code, but he lost before an ALJ and later lost an administrative mandamus writ proceeding before the superior court.  The lower court ordered him to pay District’s routine costs of $3,951.74, consisting mainly of District’s preparation of the ALJ transcripts after teacher requested an indigency fee waiver. 

               On appeal, teacher argued that, as an in pro per litigant, he was excused from paying costs, an argument rejected by both the trial and appellate courts.  The Sixth District first noted the general rule:  courts have no discretion to deny costs based on the losing party’s lack of resources. (See Nelson v. Anderson (1999) 72 Cal.App.4th 111, 129 [concluding that there is no “discretion to consider a party’s ability to pay” under section 1032 of the Code of Civil Procedure]; see also Alfaro v. Colgate- Palmolive (LAUD Asbestos Cases) (2018) 25 Cal.App.5th 1116, 1124-1125 [finding “no authority . . . for the court to analyze whether costs are reasonable based on the losing party’s ability to pay” under section 1033.5 of the Code of Civil Procedure].)  Teacher argued the result was different under CCP § 1094.5 in mandamus writ proceedings, but the reviewing court dispatched that contention by observing that record preparation was taxable by the prevailing party, not just a prevailing petitioner, such that the Legislature created no “indigency exception” under section 1094.5.

Family Law: Ex-Husband’s Pre-Marriage Contractual Debt, Including Attorney’s Fees Liquidated Later Through A Post-Separation Award, Were Properly Characterized As A Responsibility Of Ex-Wife

It Did Not Matter If The Debt Was Incurred Before Marriage Or If The Fee Award Was Fixed After Separation.

               Although unpublished, Marriage of Ferris, Case No. A165952 (1^st Dist., Div. 5 Mar. 15, 2024) (unpublished) may be an eye opener for spouses who may not have been informed about contractual debts incurred by their new husband or wife before the marriage or for debts fixed in amount after the couples separate.

               Ferris was a situation where ex-husband entered into a real estate contract, with a contractual fees clause, later giving rise to a judgment for attorney’s fees against him and in favor of the other prevailing party to the contract after she successfully demurred to ex-husband’s cross-complaint.  The contract was entered into by the ex-husband and prevailing party years before ex-husband and ex-wife got married, even though the lawsuit against ex-husband and fees judgment occurred while the couple were legally separated.  Prevailing party then intervened in the couple’s divorce action to collect on the judgment based on there being surplus funds from a foreclosure sale of the couple’s former house.

Ex-wife successfully argued at the trial court level that (1) ex-husband’s real estate venture occurred before the marriage and did not benefit the community; and (2) the fees were awarded after the couple’s separation.  The lower court agreed that the fee award was not a “contract debt” under Family Code section 903 because any obligation to pay attorney’s fees was contingent on future events, the obligation to pay fees occurred after the date of separation such that it was ex-husband’s separate obligation, and the debt was not for the common necessaries of life for either spouse/children of the marriage.

               The 1/5 DCA reversed.  The appellate court framed the key issue as follows:  Who is liable on a debt for contractual attorney fees arising from litigation on a contract entered by one spouse before the marriage and awarded after the marriage’s demise?  It decided this presented a question of statutory interpretation subject to de novo review.

               It had to consider two Family Code statutory provisions.  Section 910(a) provides that “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.”  Section 903, in turn, states that a contractual debt is incurred “at the time the contract is made.”  Piecing these two provisions together, the reviewing panel found that the community estate was liable for a spouse’s breach of a contract he or she entered into before or during the marriage, with section 903 oblivious to the time of performance of a contract.  (In re Marriage of Feldner, 40 Cal.App.4^th 618, 621-622 (1995).)

               It was immaterial that the potential liability for fees on the contract were uncertain at the time the contract was made, given that contractual rights contingent upon future events still mean the debt belonged to the community.  (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 685-686 (2016); In re Marriage of Brown, 15 Cal.3d 838, 846 n. 8 (1976); In re Marriage of Fonstein, 17 Cal.3d 738, 746 (1976).). It was also irrelevant that the marital community did not benefit from the contract, because ex-wife could seek reimbursement from ex-husband for the debt to the third-party.  Finally, “the necessaries of life” argument did not prevail because the debt was incurred before marriage, not during it.  Bottom line, the debt was community in nature.

Section 998: Plaintiff Tenants’ Rejection Of Defense 998 Offers Resulted In A Painful Result . . .

After Obtaining A Total Jury Award Of $54,258, After An Offset For This Amount, Tenants Owed Defendants $510,828.54 In Fees And Costs For Rejecting Substantial 998 Defense Offers.

               If there is ever a case which shows how plaintiffs need to seriously evaluate CCP § 998 offers, McAdoo v. Wellington Prop. Co., Case Nos. A163856 et al. (1^st Dist., Div. 2 Mar. 13, 2024) (unpublished) is a case book study on the subject.  It is painful for the plaintiffs.

               In this one, two plaintiff residential tenants largely were unsuccessful in a mold/water intrusion case, where they dismissed a Civil Code section 1942.4 wrongful payment of rent claim without any agreement on costs and fees.  Defendant offered to settle under section 998, per each plaintiff, for $40,000 plus reasonable fees and costs to be awarded by the court, offers which were rejected.  Plaintiffs sent their own 998 offer settling for $550,000, which did not gain traction.  After a seven-week jury trial, plaintiffs were awarded a total of $54,258 in damages under constructive eviction/implied covenant claims after asking the jury to award them $610,000, but with the jury also deciding other claims in favor of the defense. 

               Then reality hit, as the opinion shows.  The defense moved for attorney’s fees and costs based on the successful 998 offers, which plaintiffs did not contest as far as entitlement for the defense.  Defendants asked for $1.881 million in fees and costs, with the trial court determining that $1.62 million was a reasonable lodestar award.  However, because plaintiffs argued they did not have the financial resources to satisfy this type of award, the lower court reduced that by $1.2 million down to $450,000 as to the fee component.   The trial court also awarded the defense about $115,631 in routine costs, primarily expert witness fees.  When all the math was done after offsetting the damages obtained by plaintiffs, they were owing defendants $510,828.54 based on § 998 shifting.

               Plaintiffs appealed, but they obtained no change in result.  Plaintiffs did not gain credibility with the appellate court, because their claim of poverty on appeal was belied by the record showing they both had significant six-figure incomes and assets which would support the award by the lower court.  The routine costs component was authorized by law, such that plaintiffs’ legal arguments otherwise were found not be persuasive.  Ouch!

Private Attorney General: $2.317 Million Fee Request Properly Denied Where Nonprofit Petitioner Only Obtained Limited Relief With No Tangible Economic Benefit

Significant Benefit Element Of Private Attorney General Statute Was Not Satisfied.

               Nonprofit petitioner in The Affordable Housing Coalition of San Diego County v. Drager, Case No. C097016 (3d Dist. Mar. 11, 2024) (unpublished) brought a wide range of claims against governmental entities, obtaining limited relief on payment of loan reporting requirements with respect to former redevelopment agencies.  Emboldened by the relief, nonprofit requested CCP § 1021.5 fees of around $2.317 million.  The lower court denied the request based primarily on there no being significant benefit garnered.  The appellate court affirmed.  The responsible successor agencies reported on loan obligations long before the litigation.  In addition, substantial evidence in the record supported the lower court’s conclusion because no prayer was contained in nonprofit’s pleadings as to how the money should be spent, with it being dubious if there were any loans to be repaid by any of the governmental entities.

Judgment Enforcement: Denial Of Judgment Collection Fee Request In 1st Action Reversed Because Judgment Creditor Did Not Have To Show He Was A “Prevailing Party” To Obtain Necessary/Reasonable Fees From Prosecuting A 2nd Fraudulent Transfer Action

Also, The Appellate Court Rejected An Argument That Judgment Debtor Had Satisfied The Judgment When There Was A Pending Request For More Judgment Collection Fees Not Factored Into The Satisfaction Tender.

               G.F. Galaxy Corp. v. Johnson, Case No. D081492 (4^th Dist., Div. 1 Feb. 26, 2024 unpublished) [certified for publication on Mar. 8, 2024] involved a situation where Galaxy, as a judgment creditor, obtained a judgment against Johnson, as a judgment debtor, in a first action, later commencing a second fraudulent transfer action to aid in collection of the judgment.  Judgment creditor filed a costs memorandum pursuant to CCP § 685.040 to collect fees and costs on the judgment, primarily derived from work in the second action.  The lower court granted judgment debtor’s motion to tax costs; it found that a costs memorandum, not a noticed motion, was a proper vehicle to make the request, but found that judgment creditor was not yet the prevailing party in the second action because it was ongoing.  Galaxy appealed, primarily arguing there is no “prevailing party” requirement under the judgment enforcement fee-shifting statutes (i.e., CCP §§ 685.040, 685.070).

               Before turning to the merits, Johnson argued that he had successfully satisfied the judgment by tendering an accepted check to judgment creditor, which did not include any of the amounts contained in the previously filed costs memorandum.  The appellate court rejected this argument, because there could be no satisfaction given that judgment creditor had filed his costs memorandum before the check was tendered so that judgment debtor knew judgment creditor was claiming more was due—distinguishable from Gray I CPB, LLC v. SCC Acquisitions, Inc., 233 Cal.App.4^th 882 (2015) because the judgment creditor in that case had not filed any request for additional costs before accepting the tender. The appellate court found the fact that the lower court had not ruled on Galaxy’s costs memorandum as not diminishing the conclusion that there was no satisfaction.

               That brought the appellate court to the merits.  It reversed the denial of judgment enforcement collection costs (most of which were incurred in the second matter) and remanded for the lower court to determine if judgment creditor’s claimed costs were necessary and reasonable under the judgment collection fee statutes.  It found no “prevailing party” requirement in section 685.040.  Further, section 685.070 has no requirement that the judgment creditor wait until resolution of the second action, which could mean that the creditor would waive fees/costs after the 2-year deadline depending on the progress of the second case—which would mean the judgment creditor would have to quickly file costs memorandum to avoid forfeiture.  Also, the fraudulent transfer act does not have a fees provision, which furthered the equities for allowing capture of those fees in the first action through the judgment collection fee statutues. 

BLOG SHOUT OUT:  Steven L. Krongold was one of the attorneys on the winning side.  He worked with co-contributor Mike at Mike’s first Orange County law firm.  Congratulations, Steve.

Allocation, Costs, Trade Secrets: Plaintiff Obtaining Permanent Injunction Was Entitled To Contractual Attorney’s Fees, But Fee Determination By Lower Court Remanded To Reconsider 75% Reduction In Request And Denial Of Discovery Work

4/3 DCA Also Determined Contractual Expenses Must Be Pled And Proven As Damages, As Well As Reversed A Nonsuit On Whether The Trade Misappropriation Was Willful and Malicious.

               In Applied Medical Distrib. Corp. v. Jarrells, Case No. G062056 (4^th Dist., Div. 3 Mar. 8, 2024) (published), plaintiff former employer Applied sued former employee Jarrells and his new employer for trade secret misappropriation, contractual breach of using proprietary information under a contract with a fees, costs, and expenses clause, and breach of fiduciary duty.  The jury found Jarrells had misappropriated trade secrets, but he suffered no damages and or unjust enrichment.  Later, the trial court granted Applied’s request for a permanent injunction (after earlier granting a stipulated-to preliminary injunction) and partially awarded it requested fees, costs, and expenses (with the fee request being about $3.9 million).

               On appeal by Applied, the 4/3 DCA—in an opinion by Justice Gooding, the appellate court’s most recent appointed member—affirmed in part and reversed in part. 

               The lower court did not err in crediting Applied’s assertion that it had excluded all noncompensable time on certain work.  It also did not err in concluding that Applied was only entitled to compensation for work in obtaining injunctive relief based on the breadth of the contractual fees, costs, and expenses clause.

               However, the appellate court found that the lower court made two improper reductions.  First, the lower court erred in only awarding 25% of the fee request based on Applied recovering on one out of four causes of action because that reduction failed to appreciate intertwined work potentially worthy of compensation on the other counts.  Second, the lower court improperly denied for discovery work relating to obtaining the permanent injunction because that was a merits determination for which compensation was recoverable.

               The reviewing panel concluded that the lower court properly awarded litigation expenses under the fees, costs, and expenses contractual clause because the expenses needed to be plead and proven as damages at trial, bringing the 4/3 DCA in alignment with the majority of intermediate appellate courts which have confronted this issue.  (In doing so, it distinguished Thrifty Payless which came to a different result under much different circumstances.)

               Finally, the 4/3 DCA determined that the lower court erred in granting nonsuit on whether the trade misappropriation was willful and malicious.  This meant that a jury trial was necessary to revisit the issue; and, if it decides that the misappropriation was elevated in nature, the lower court would then have to determine fees to which Applied would be entitled under Civil Code section 3426.4 (CUTSA’s statutory fee authorization).

Arbitration: 30-Day Deadline To Pay Arbitration Fees For Employee’s Arbitration Expenses Runs From Receipt Of Invoice

Fifth District Reversed An Order Withdrawing The Case From Arbitration Because Evidence Showed JAMS Invoice Not Received Until Later By Employer.

               Construing CCP § 1281.98 through plain dictionary meanings, the Fifth District in Lopez v. Landscape Development, Inc., Case No. F085676 (5^th Dist. Mar. 7, 2024) (unpublished) reversed an order withdrawing a case from arbitration and imposing sanctions on employer when the record showed employer did not receive a JAMS invoice until after its designated due date and then paid on time from date of receipt. The statute runs the 30-day payment deadline from receipt of the invoice, with prior JAMS emails and correspondence only talking about arbitral expenses and indicating an invoice would be sent later.

Section 998: 998 Offer Calling For Dismissal Of Action With Prejudice, Not Entry of Judgment, Is Valid

This Means The Lower Court Needed To Honor the $350,000 Accepted Offer And Enter Judgment Thereon.

               In Chiu v. Wu, Case No. H050642 (6^th Dist. Mar. 6, 2024) (unpublished), Plaintiffs accepted defendant’s $350,000 CCP § 998 offer calling for dismissal of action with prejudice, not entry of a judgment.  After some procedural gaffes (including the lower court vacating an erroneous $3.5 million clerk’s judgment which was not challenged), the lower court denied defendant’s motion to set aside the 998 offer but did find the 998 offer was invalid because it called for a dismissal of the action with prejudice.  The appellate court reversed and remanded with instructions to enter a judgment of $350,000.  A dismissal of an action with prejudice is a alternative final disposition equivalent to a judgment.  With respect to the defense arguments on the 998 offer, respondent did not file a cross-appeal, so those arguments could not be entertained. 

Allocation, Fee Clause Interpretation, Section 1717: Intervening Insurer Not Responsible For Fees To Prevailing Party, While Litigant Losing Alter Ego Arguments Was Responsible For Fees

Lower Court Also Did Not Err By Awarding Insurer Rate Fees To A Prevailing Party, Apportioning Out Noncompensable Fees.

               Yee v. Weinberg, Case No. A163850 et al. (1^st Dist., Div. 4 Mar. 5, 2024) (unpublished) is a situation where a plaintiff landlord prevailed against defendant tenant, with landlord receiving some fees (but none against the intervening insurer eventually withdrawing from the case), but with landlord having to pay fees to defendants not proven to be alter egos.  Some of the winning defendants were awarded fees, but at lower rates charged by the insurance carrier and with some apportionment done by the lower court.

               All of the fee determinations were affirmed on appeal.  The insurer was not responsible for fees because (1) there was no contract or statute allowing fee entitlement to landlord, and (2) insurer’s dismissal of its intervention complaint was a contractual dismissal which invoked the Santisas fee bar.  The fee award to the alter ego defendants was no fluke because plaintiff failed to prove they were alter egos, which invoked Reynolds Metals as the fee entitlement basis.  Defendants complaining about the lower court’s reduction in fee requests, through cross-appeals, showed no abuse of discretion in allowing compensation only at the rates charged by the insurance carrier’s counsel and apportioning out fees which were not compensable.

Costs, Fees On Fees, Lodestar: Fee Award Reversed Because Unavailability Of Out-Of-Venue Counsel Should Have Been Considered, 30% Reduction For Pre-Trial Settlement Efforts Was Unwarranted, And Fees On Fees For Reply Work Should Have Been Considered

However, Denial Of Expert Witness Fees As Costs For Non-Court Ordered Witness Was No Abuse Of Discretion.

               In California Open Lands v. Butte County Dept. of Public Works, Case No. C097297 (3d Dist. Mar. 4, 2024) (unpublished), plaintiff reached a settlement with a county government in a conservation easement case with Clean Air Act issues.  Nonprofit plaintiff moved for $766,078 in private attorney general fees and $59,325.07 in costs, with hourly rates based on San Francisco rather than Butte County rates.  The lower court partially granted the fee request, but used lower Butte County rates because it did not deem the matter complex, reduced fees by 30% based on perceived pre-lawsuit settlement proposals by the municipal entity, and did not award work on reply papers for the “fees on fees” request.   It also denied the costs request, most of which encompassed expert witness work for experts neither authorized by the court nor subject to CCP § 998 shifting.

               The appellate court reversed and remanded the fee award on three grounds:  (1) nonprofit did produce evidence that it could not retain local counsel versed in conservation easement and Clean Air Act matters, which needed a revisit for whether higher out-of-market rates were justified; (2) the 30% reduction for settlement efforts had no evidentiary support in the record; and (3) reply paper work should be considered in awarding attorney’s fees on the “fee on fee” request.

               With respect to the expert fee costs denial, those determinations were affirmed.  Nothing showed that one of the experts was ordered by the court, so it was not a proper costs item.  Another expert was a consulting expert, with nothing cited to show this was a proper cost.  Finally, nothing in the routine cost statute allowed staff costs to be awarded for the work of an executive director of the nonprofit to enforce the conservation easement.

Homeowner Associations: Attorney’s Fees Are Not Fiduciary Duty Breach Tort Damages And $1.328 Million Fee Award Against Individual Directors Under Civil Code Section 5975 Reversed As A Matter Of Law.

Section 5975 Fees Only Awardable Against Nonprevailing HOA.

               In Colyear v. Rolling Hills Community Assn. of Rancho Palos Verdes, Case No. B308382 (2d Dist., Div. 4 Mar. 1, 2024) (partially published; fee discussion not published), plaintiff homeowner won a declaratory relief action based on a dispute over tree-trimming covenants in certain recorded Declarations, with the lower court awarding plaintiff over $1.328 million in attorney’s fees under Civil Code section 5975, the Davis-Stirling Act fee shifting provision involving CC&Rs against both the HOA and individual directors.  The appellate court reversed a breach of fiduciary duty judgment against HOA, determining that attorney’s fees are not damages for purposes of this tort.  With respect to the section 5975 fee award, the 2/4 DCA affirmed the fee award against HOA but reversed the award against individual directors, finding section 5975 did not apply to individual directors after reading sections 5975 and 5980 in tandem.

Estoppel, Fee Clause Interpretation, Section 1717: Lower Court’s Denial Of Attorney’s Fees To Prevailing Plaintiffs In CC&R Flag Pole Placement Dispute Was An Abuse Of Discretion

Judicial Estoppel Applied And Plaintiffs Were The Unqualified Winners.

               In Rowan v. Hilliard, Case No. D081687 (4^th Dist., Div. 1 Feb. 29, 2024) (unpublished), plaintiffs prevailed against defendants/cross-complainants in a flag pole placement dispute under CC&Rs, which had a fees clause giving the lower court the authority (“shall have the authority”) to award reasonable attorney’s fees to the prevailing party.  The trial judge found that this clause was only discretionary even though plaintiffs prevailed.

               The 4/1 DCA reversed.  It initially determined that defendants were judicially estopped from denying the fee clause applied, because they previously convinced a judge to award fees after winning a summary judgment motion (a win reversed earlier by the appellate court).  Further, it was an abuse of discretion not to award fees because plaintiffs were the unqualified winners and Civil Code section 1717 applied so they were entitled to fees.

Special Fee Shifting Statutes: Fee Award For Hospital Affirmed And Fee Award For Medical Staff Reversed In Peer Review Dispute Involving Doctor’s Suspension Of Hospital Privileges

Fee Shifting Centered On Business & Professions Code Section 809.9.

               One of the interesting aspects of posting on California fee decisions is we get to explore some special fee shifting statutes.  Business and Professions Code section 809.9 is a specialized one allowing for substantially prevailing party fees to the winner in a peer review hospital privilege suspension case.  That section states:  “In any suit brought to challenge an action taken or a restriction imposed which is required to be reported pursuant to Section 805, the court shall, at the conclusion of the action, award to a substantially prevailing party the cost of the suit, including a reasonable attorney’s fee, if the other party’s conduct in bringing, defending, or litigating the suit was frivolous, unreasonable, without foundation, or in bad faith. For the purposes of this section, a defendant shall not be considered to have substantially prevailed when the plaintiff obtains an award for damages or permanent injunctive or declaratory relief. For the purpose of this section, a plaintiff shall not be considered to have substantially prevailed when the plaintiff does not obtain an award of damages or permanent injunctive or declaratory relief.”

               Plaintiff doctor lost such a proceeding, leading to a fee award in favor of the hospital and medical staff defendants.  In Asiryan v. Medical Staff of Glendale Adventist Medical Center, Case No. B316313 et al. (2d Dist., Div. 1 Feb. 29, 2024) (unpublished), the appellate court affirmed fees to the hospital but reversed fees to the medical staff under section 809.9.

               Here is its discussion of section 809.9: [Plaintiff] contends the court erred in concluding fees were appropriate under section 809.9, because her “conduct in bringing, defending, or litigating the suit” was not, as the statute requires, “frivolous, unreasonable, without foundation, or in bad faith.”  (§ 809.9.) Whether an action is “frivolous,” “unreasonable,” or “without foundation” under a statute authorizing an award of
costs or attorney fees presents a question of law we review de novo where, as here, the pertinent facts are not in dispute. (Smith v. Selma Community Hospital (2010) 188 Cal.App.4th 1, 7 & 30–33 (Smith).) In analyzing this issue, courts employ the objective standard applicable to sanctions statutes, which looks to what a hypothetical reasonable attorney would do under the circumstances. (Id. at pp. 32–33 [in reviewing an award of attorney fees under section 809.9, the court “conduct[ed] an independent review . . . appl[ying] the any-reasonable-attorney standard as a matter of law” and “[i]f the conduct in question meets this standard, then the record also would contain substantial evidence supporting a finding of fact that the conduct was reasonable”]; see Mir v. Charter Suburban Hospital (1994) 27 Cal.App.4th 1471, 1485 [“[b]ecause section 809.9 contains the same type of language as these other [sanctions] statutes, it is more appropriately construed as a sanctions measure specifically applicable to suits challenging medical peer review decisions”].) “[A] matter is frivolous if any reasonable attorney would agree it is completely without merit in the sense that it lacks legal grounds, lacks an evidentiary showing, or involves an unreasonable delay.” (Smith, supra, at p. 33.) “A claim is factually frivolous if it is ‘not well grounded in fact’ and it is legally frivolous if it is ‘not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.’ [Citation.]” (Peake v. Underwood (2014) 227 Cal.App.4th 428, 440 (Peake); Smith, supra, at p. 40 [approving of section 809.9 analysis applying this definition].) An action is “without foundation” if there is no direct or circumstantial evidence supporting the plaintiff ’s factual assertions, or if there is no statute, regulation, case law, or other legal authority supporting the plaintiff’s legal contentions. (Smith, supra, at pp. 30–31.)  The terms “frivolous,” “unreasonable,” and “without foundation” partially overlap. To determine whether an action may be described by any one of them, a court must assess the grounds underlying the plaintiff ’s factual or legal positions and the reasoning process linking those grounds to the ultimate conclusions advocated by the plaintiff. (See id. at p. 33.)

               Applying these principles, the Asiryan panel found that plaintiff’s argument as to the hospital had no foundation, but that the lower court’s denial of summary judgment and nonsuit motions as to medical staff meant that a reasonable attorney could conclude there was a basis to go to trial even though plaintiff eventually lost.

Section 998: Plaintiff’s Rejection Of $25,000 CCP § 998 Offer Was Unwarranted

Costs Award Of $484,834.16 Affirmed On Appeal, Mainly Expert Witness Fees.

               CCP § 998 can be a game changer, as Oshodin v. Fire Ins. Exchange, Case No. B319043 (2d Dist., Div. 1 Feb. 29, 2024) (unpublished) demonstrates.  What happened here was that plaintiff rejected a 998 offer for $25,000, although they had a $1 million conceded offset and made large damage claims not ultimately successful.  The rejection of this 998 defense offer justified a $484,834.16 costs award, including expert expenses incurred during an Evidence Code section 402 hearing. 

Arbitration: Employer’s Failure To Timely Pay Arbitration Fees To JAMS Under CCP § 1281.98 Meant Litigation For The Parties, With JAMS Having No Power To Extend The Deadline Unless All Parties Consent

Dissent Believed That The FAA Preempted Section 1281.98.

            In Hohenshelt v. Superior Court, Case No. B327524 (2d Dist., Div. 8 Feb. 27, 2024) (published), by a 2-1 margin, the majority determined that employer forfeited the ability to arbitrate by not paying arbitration fees and expenses as required under CCP § 1281.98, even though JAMS extended the payment deadline.  It had no power to do so unless all parties consented in writing (which did not happen), meaning the employee was entitled to litigate in court rather than required to arbitrate.  In dissent, Justice Wiley concluded that section 1281.98 was preempted by the FAA.

Consumer Statutes, Section 998: Because Section 998 Does Apply To Lemon Law Cases, Fee/Costs Award Had To Be Reduced By Post-Fees Covered By Defense 998 Offer

However, Majority And Dissenting Justices Disagreed On Whether Section 998 Applied To A Litigation Ended Through A Settlement.

            Ayers v. FCA US, LLC, Case No. B315884 (2d Dist., Div. 8 Feb. 27, 2024) (published) is an interesting decision involving the interplay between the Song-Beverly Act “lemon law” fee/costs shifting provisions and pretrial offers under CCP § 998.  Section 998 prevailed in this case, although the majority and dissenting justices weighed in on the Madrigal issue being considered by the California Supreme Court—whether section 998 applies to litigation concluded through a settlement agreement.

            In a Jeep lemon law matter, the record showed that plaintiff and defendant traded numerous settlement proposals and CCP § 998 offers over a lengthy time frame, both before a lawsuit was filed and after litigation commenced.   During the course of the litigation, an appellate decision found a change in law on how to value “trade in” mitigation by the plaintiff in lemon law cases, although the law is not necessarily uniform in this area.  But, salient for the ultimate disposition in this case, the lower court granted fees and costs to plaintiff, with some reductions, but did not decide whether any defense 998 offers made any difference, although a 2018 offer would have eliminated about $74,523.50 in further fee exposure.

            The justices in the majority decided that the February 2018 CCP § 998 offer was valid and reduced the fee award to the lemon law plaintiffs.  In doing so, they recognized the following:  (1) section 998 does apply to lemon law cases, relying on Duale v. Mercedes-Benz USA, LLC, 148 Cal.App.4^th 748 (2007); (2) section 998 applies to litigation terminated by settlement, accepting the majority’s analysis in Madrigal (which is currently under review by the California Supreme Court); (3) section 998 offers do allow the court to consider changes in the law (such as on the “trade-in” reduction issue); and (4) payment and deposit terms do not render a section 998 offer uncertain. 

            Justice Viramontes, in his dissent, believed that section 998 does not apply to litigation terminated by settlement, discussing legislative history which bolstered his conclusion to the contrary given the equally susceptible competing interpretations set forth in Madrigal.