CALIFORNIA ATTORNEY'S FEES

Damages, Section 1717: In Malpractice Case For Missed Appeal, Borrowers Recovered Only A Portion Of Fees Paid To Trustee Because Trustee Was Entitled To Recovery Under § 1717 Such That The Additional Fees Were Not Chargeable Against Malpractice Defendant

Case-Within-Case Malpractice Principles Drove The Result.

            As our last post for 2021, we discuss fee recovery as damages in an interesting legal malpractice case, Thompson v. Flynn Riley Bailey & Pasek, LLP, Case No. A161238 (1^st Dist., Div. 4 Dec. 30, 2021) (unpublished).

            What happened in this one was that borrowers received some recovery against their attorneys for failing to timely appeal a merits judgment in favor of a deed of trust trustee, which resulted in the recovery of some compensatory damages and $105,320 out of $600,000 in attorney’s fees paid to the prevailing trustee in prior litigation.  However, borrowers claimed that they should be entitled to about $500,000 more in fees which they paid to the trustee in a settlement, a request denied by the trial judge.  The parties on appeal agreed that the answer to this question rested on whether trustee could have recovered Civil Code section 1717 prevailing party fees—if so, the $500,000 in fees as additional damages were not proper.

            The 1/4 DCA affirmed the denial of awarding more fees as damages.  Based on borrowers contending that loan documents were an integrated contractual transaction, there were contractual fee clauses which allowed fee recovery to the trustee if it had prevailed.  It did not matter what the merits of the theory were, because a hypothetical recovery under section 1717 is all that is needed.

Damages: Trial Court Erred In Granting Motion In Limine And Denying Motion To Amend To Allow Plaintiff To Pursue Attorney’s Fees As Damages In Residential Rescissionary Case

First District Suggests That Nonstatutory Motions For Judgment On The Pleadings Might No Longer Be Viable And Cautions Against Use Of Motions In Limines As Substitutes For Statutorily Authorized Dispositive Motions.

            Plaintiff in Tung v. Chicago Title Co., Case No. A151526 (1^st Dist., Div. 3 Apr. 28, 2021) (published) sought attorney’s fees as damages for securing/quieting title from defendants (many insured by Chicago Title) of a two-unit San Francisco residence.  The lower court granted a motion in limine on the eve of trial in which it refused to allow introduction of fees because they were not specifically pled as damages and also denied a motion to amend as tardy/prejudicial to the defense.

            The 1/3 DCA, in an opinion authored by Retired Justice Wiseman (a former Fifth District justice sitting by assignment), reversed on behalf of a 3-0 panel.  Because defense counsel was aware fees were being sought as damages, the denial of leave was an abuse of discretion under the circumstances.  She also made two other interesting observations in the opinion:  (1) questioning whether nonstatutory motions for judgment on the pleadings are viable (although not deciding the issue); and (2) cautioning against the use of motions in limine as substitutes for statutorily authorized dispositive motions, which put the burden on the trial judge rather than the moving trial counsel.  Here is what she said on the last issue: “In addition, we caution trial judges to be wary when choosing to decide an in limine motion that, no matter how captioned, functions as a nonstatutory motion for judgment on the pleadings, particularly when the motion is filed on the eve of trial. Doing so, under circumstances like those presented here, is a recipe for reversal.”

Damages: Although Attorney’s Fees Are Not Generally Awardable As Damages In Personal Injury Or Normal Contract Cases, Failure To Object To Fee Testimony And Ask For CACI NO. 3964 Instruction Did Not Prevent Jurors From Awarding Fees In Contract Action

2/6 DCA Has A Good Discussion Of How Defense Should Proactively Prevent Fees From Being Awarded As Part Of A Routine Contract Breach Case Where Fees Should Be Considered As Post-Judgment Costs By The Trial Judge.

            Norholm v. Cirovic, Case No. B308563 (2d Dist., Div. 6 Apr. 22, 2021) (unpublished) is an interesting case where a lower court granted a new trial because the jury awarded attorney’s fees as damages in a breach of contract action, but the appellate court reversed because of what the defense did not do as far as trial testimony and requesting a necessary instruction.

            Here, the jury apparently awarded $20,000 in fees as part of a contractual breach award to plaintiff, after the defense failed to object to testimony about incurred fees and did not request CACI No. 3964 [a jury instruction which reads “You must not consider, or include as part of any award, attorney fees or expenses that the parties incurred in bringing or defending this lawsuit.”].  However, the trial judge granted a new trial based on two juror declarations indicating that fees were awarded as part of the contract verdict.

            The 2/6 DCA reversed.  Although one of the juror declarations was inadmissible under Evidence Code section 1150(a), the other juror declaration showing fees were added involved objective, overt actions which was admissible.  (Krouse v. Graham, 19 Cal.3d 59, 80-81 (1977).)  The problem was that the inclusion of fees was an error essentially invited by the defense in failing to object to the fee testimony and not requesting the CACI No. 3964 instruction.  Given those circumstances, the jury was within its power to award attorney’s fees to make plaintiff whole from a benefit-of-the-bargain damages perspective.  New trial grant reversed.

Damages: Attorneys Asserting Claim For A Client In Order To Collect Some Of Their Attorney’s Fees Does Not Constitute Improper Purpose To Sustain A Malicious Prosecution Claim

Kentucky Supreme Court So Holds In July 2020 Published Opinion.

            Malicious prosecution, in California and most jurisdictions, has an improper purpose element with respect to filing or prosecuting a claim—with Kentucky labeling malicious prosecution as a wrongful use of civil proceedings claim.  The Kentucky Supreme Court, in Seiller Waterman, LLC, et al. v. RLB Properties, Ltd., Nos. 2018-SC-0538-DG and 2018-SC-0558-DG (Ky. July 9, 2020), petn. for rhg. denied, September 24, 2020, faced the issue of whether improper purpose for purposes of a malicious prosecution claim could be based on allegations that a client’s attorneys filed claims against an adversary litigant in order to recoup its professional fees (“extort fees,” as colorfully used in the pleadings).  It concluded that this theory could not support a malicious prosecution claim.  “. . . an attorney seeking to collect an attorney fee in the usual course of representing a client is not acting for an improper purpose, a necessary element of the wrongful use of civil proceedings claim.  Even if the attorney acts without probable cause to believe the client’s claim will succeed, the improper purpose which may subject an attorney to liability to a nonclient must be something other than simply earning a fee.”  (Slip Op. at p. 15.)  For readers wanting to review this opinion, it is available over the Internet at justia.com.

Costs, Damages: $298,843 Attorney’s Fees Recovery To Prevailing Cross-Defendant Subcontractor In Personal Injury Case Affirmed On Appeal

Attorney’s Fees Could Be Claimed As Costs Based On Contractual Fees Clause, Not Having To Be Plead As Damages And Not Subject To Any Reduction Because Insurance Carrier Covered Fees For Cross-Defendant.

            In Strouse v. Webcor Construction, L.P., Case No. A148863 (1^st Dist., Div. 3 March 27, 2019) (unpublished), plaintiff, employee of subcontractor ACCO, suffered a workplace injury at Cal Berkeley’s Memorial Football, ensuing him to sue general contractor Webcor for negligence. Webcor, in turn, sued subcontractor ACCO for indemnity (under an agreement with a contractual fees clause). A jury found Webcor 100% liable, and the cross-complaint was adjudicated in favor of ACCO. The trial judge later awarded ACCO $298,843 in attorney’s fees for prevailing on the cross-complaint as against Webcor.

            Webcor lost both the merits appeal and the appeal of the fee recovery.

            The appellate court determined that the fees could be claimed as costs, not having to be pled as damages so as to justify entitlement. It did not matter that ACCO had insurance coverage so that fees were paid by someone else did not mean fees were not “incurred.” (Staples v. Hoefke, 189 Cal.App.3d 1397, 1410 (1987).) The fee recovery was no “double recovery” in addition to the jury verdict because fees are costs, not damages.

            BLOG OBSERVATION—Keith Amelee and Lou Klein at Foley & Mansfield were the successful trial attorneys for ACCO. Co-contributor Mike was a fee expert in the lower court fee proceeding, where the trial judge issued an award with a minor discount from the fee request. On appeal, Margaret Johnson and Lou at Foley were the successful appellate attorneys before the First District. Congrats to the attorneys at Foley & Mansfield.

Damages, Landlord/Tenant, Poof!: After Punitive Damages Reduction Of Almost $56 Million, Plaintiffs Walk Away With Judgment Of More Than $5 Million, But Watch It All Go POOF! On Appeal

No Segregation Between Properly And Erroneously Awarded Amounts Meant Plaintiffs Lost The Full Amounts Of Their Awards For Compensatory Damages Of $1,289,000, Punitive Damages Of $1,289,000, Attorney Fees Of $2,385,773.70 and Costs Of $56,417.72

        In Bevis v. Terrace View Partners, LP, Case No. D071849, (4^th Dist., Div. 1 February 28, 2019) (unpublished), sixty-nine current and former residents of a mobile home park sued the park’s owners on allegations that they had failed to maintain the park in “good working order and condition” which created a nuisance that – along with high space rent increases – made it difficult or impossible for park residents to sell their mobile homes. The trial court denied Plaintiffs’ motion for class certification, but the parties agreed to try the case in phases, with the first phase involving 16 residents living in 10 of the spaces.

        The jury in the first phase found the park owners liable and awarded plaintiffs $1,289,000 in compensatory damages ($759,000 in economic and $530,000 in noneconomic damages), plus $57 million in punitive damages. After the jury’s discharge, the trial court ruled on Plaintiffs’ cause of action for violation of Business and Professions Code section 17200 et seq. (unfair competition law (UCL)) - that a “catch-up” provision in Defendants’ long-term leases was in violation of the UCL in that the provision allowed for significant increases in rent at the end of a lease term. Finally, the trial court reduced the punitive damages award to match the compensatory damages - $1,289,000, and awarded attorney fees (with an enhancement to the lodestar) and costs of $2,385,773.70 and $56,417.72, respectively.

        Plaintiffs were not happy about the almost $56 million reduction to their punitive damages award. Defendants disagreed with the judgment and post-judgment orders – contending that the judgment was not supported by the evidence or on a statutory basis, and that the court had abused its discretion in its findings. Defendants further claimed that the court had abused its discretion by awarding Plaintiffs’ full recovery of attorney fees despite their failure to prevail on some of their claims, by not reducing Plaintiffs’ fee award by amounts billed for unadjudicated claims and the unsuccessful class certification motion, and the unavailability of attorney fees award for the UCL cause of action – that the court had also erred in awarding an enhancement to the lodestar amount. Plaintiffs and Defendants appealed. 

        The 4/1 DCA reversed in part, and remanded certain viable claims for new trial. However, here’s the sticky wicket – the 4/1 DCA found that the majority of the awarded compensatory damages were for Plaintiffs’ claims based on unreasonably high rent, but that absent a rent-control ordinance (which did not exist here), Defendants could not be limited to charging a lower rent than their rental agreements allowed. In reversing judgment as to these claims, the 4/1 DCA also sought to reverse the related compensatory damages. Unfortunately for Plaintiffs, the jury verdict forms did not segregate the economic damages by category – leaving the 4/1 DCA unable to resolve the ambiguity between the properly and erroneously awarded amounts. Based on the ambiguity and the 4/1 DCA’s finding that the majority of the economic damages were based on the claims related to the high rent – and, therefore, erroneously awarded – the entire award went POOF!. This reversal also necessitated reversal of the punitive damages and attorney fees award.

Damages: Copenbarger Opinion Now Published—Deals With Attorney’s Fees As Damages And How To Properly Authenticate Them At Trial

October 19, 2018 Unpublished Decision Now Published.

            On October 20, 2018, we posted on the then unpublished decision in Copenbarger v. Morris Cerullo World Evangelism, Inc., which was authored by Justice Fybel of the 4/3 DCA. It dealt with whether breach of a settlement agreement fees were recoverable as damages versus costs (they were recoverable as damages) and with how to competently prove the fees from an evidentiary standpoint during trial (with the judgment reversed because no proper foundation was laid).   We can now report that the unpublished decision was certified for publication on November 13, 2018.

Damages, Substantiation Of Reasonableness Of Fees: Using Client To Authenticate Attorney’s Fees Invoices Found To Be An Incompetent Showing, Requiring Reversal As A Matter Of Law

Case Is A Stark Reminder On How To Competently Introduce Attorney’s Invoices In A Trial Where Fees Are Claimed As Damages.

            Justice Fybel, a sitting justice on our local Santa Ana court (this year’s winner of the David G. Sills Award for Appellate Excellence Presentation by the Orange County Bar Association Appellate Law Section), has penned an unpublished opinion in Copenbarger v. Morris Cerullo World Evangelism, Inc., Case No. G054731 (Oct. 19, 2018) (unpublished), in which he shows how to properly introduce attorney’s fees in a case where there are damages that need to be presented before the trier of fact. The takeaway is that a client, most likely, cannot be the witness attempting to introduce them based on not knowing the extent of an attorney’s work (with only the attorney generally able to describe what was done and justify the reasonableness of the proffered fees).

            What happened in Copenbarger is that one party to a settlement agreement sued the other side for failing to dismiss an unlawful detainer action and sought, as damages, related attorney’s fees in line with the settlement agreement’s fees clause. The lower court awarded the suing party $118,000 in fees as damages.

            The losing party appealed, arguing that fees are costs of suit (not damages) and the suing party failed to present competent evidence sufficient to prove the amount of damages. Losing party lost the first argument, but it prevailed big time on the second.

            The appellate panel concluded that, by analogy to fees sought in the insurance context for wrongful denial of insurance benefits under Brandt v. Superior Court, 37 Cal.3d 813, 819 (1985), fees for breach of a settlement agreement are fees sought qua damages rather than fees sought qua costs of suit. It questioned whether contrary results in Olson v. Arnett, 113 Cal.App.3d 59, 63, 67 (1980) and Navellier v. Sletten, 106 Cal.App.4^th 763, 767-768 (2003) were correct, but did have to decide the issue based on the ruling on the second argument raised by appellant.

            The winning argument was an evidentiary one. Only the client attempted to introduce his attorneys’ invoices over the objection of the other side that the testimony was hearsay and violated the secondary evidence rule. The trial court overruled the objections, but the Fourth District, Division 3 agreed that client testimony was insufficient for purposes of admitting the invoices. The problems were that the client did not really know about the services received from his attorneys, had no independent recollection of what work was performed/specific dollar amounts, and did not remember clearly what he had paid—meaning the hearsay and secondary evidence rule (a rule which holds oral testimony to prove the content of the writing is inadmissible unless the original or copy was lost/destroyed/not reasonably procurable by court process or other means) objections should have been sustained. Beyond that, a fee proponent must prove the reasonableness of the fees sought, something a client likely cannot do alone in the vast majority of situations. The client should have called the attorneys as witnesses. Given that there was insufficient evidence to support the judgment, reversal as a matter of law and judgment in favor of the appealing party were the proper end results.

            BLOG CONGRATS—We congratulate Justice Fybel on a well-deserved award.

Damages: Non-Statutory Expenses Of $96,233.12 Was Deleted From Judgment As A Matter Of Law

These Expenses Needed To Be Pled And Proved, Neither Of Which Happened.

            Although the discussion of this issue was not published, Tierney v. Javaid, Case No. A147221 (1^st Dist., Div. 3 May 31, 2018) (partially published; costs discussion unpublished) is a stark reminder that a litigant may need to plead and prove certain litigation as expenses where they are not statutorily-recognized routine costs.

            Specifically, the prevailing party sought $96,233.12 in nonstatutory expenses from the other side in the form of expert witness fees, mock trial expenses, jury consultant expenses, and photocopy costs. The trial judge allowed them, but this was deleted from the judgment as a matter of law by the appellate court.

            The reason was that these expenses were neither pled nor proved as damages during trial. Given that they were “damages” under the governing settlement agreement, the failure to do so was fatal on appeal.