CALIFORNIA ATTORNEY'S FEES

Interest: 2/7 DCA Decides That Its Prior Directive Was A Reversal, Not A Modification, So That Interest Ran From The Second Fee Award

Reversal/Modification Delineation Can Be Fuzzy, But It Was A Reversal In This Case.

               Acting Presiding Justice Segal, in Vines v. O’Reilly Auto Enterprises, LLC, Case No. B327821 (2d Dist., Div. 7 Apr. 25, 2024) (published), quite correctly in our view noted that the issue for when interest runs on an earlier versus corrected attorney’s fees award can be thorny.  The key distinction focuses on whether the appellate court reversed or simply modified the prior order.  In the end, based on what was done in the prior appellate opinion, it was a reversal so that interest did not run until the later attorney’s fees order was entered—the dispute centered upon a $138,454.44 interest issue.  The opinion has a good discussion of the California Supreme Court’s Stockton Theatres opinion and other case law in this area. 

Interest: Trial Court Properly Rejected Interest Accruing From An Earlier 2015 Merits Judgment When Fees Were Only Awarded In Early 2019 After A Prior Appellate Reversal Of A Fee Denial

End Result Was That 3 ½ Years Of Interest Did Not Accrue, About A $100,000 Savings.

            In AAWestwood, LLC v. Liberal Arts 677 Benevolent Foundation, Inc., Case No. B302363 (2d Dist., Div. 5 Sept. 8, 2021) (unpublished), the interest accrual for a subsequent fees order was the question facing the appellate court.

            The facts were that Appellant Liberal Arts had obtained a prior money judgment against Respondent AAWestwood in Fall 2015, but the lower court denied Civil Code section 1717 contractual fees.  That prompted an appeal and a reversal; and, on remand, the lower court awarded $280,000 in lower court/appellate court fees to Appellant in early 2019.  However, the lower court denied a request to have interest accrue on the fee award going back to Fall 2015, a 3 ½ years savings of around $100,000.  The 2/5 DCA panel agreed with the lower court.  Because there was a prior reversal of a fee denial and entry of a subsequent fee award, that subsequent award was a separate money judgment from which interest accrued as of the later Early 2019 date.  (Felczer v. Apple, Inc., 63 Cal.App.5^th 406, 415 (2021).)  Respondent was awarded costs on appeal, but no attorney’s fees. 

Interest: Postjudgment Interest On Prejudgment Fees/Costs Begins Accruing On The Date Of The Judgment Or Order Establishing A Party’s Right To Recover Fees/Costs Whether Or Not That Recoverable Amount Has Been Established

Lucky Did Not Reach All Aspects Of The Issue Before The 4/1 DCA – With Copper Liquor Being More In Line With The Panel’s Construction Of The Enforcement Of Judgments Law.

Steve Jobs [Apple computer].  1984.  Photographer Bernard Gotfryd. Library of Congress.

            For a great discussion on the start date for the accrual of postjudgment interest on an award of prejudgment costs and/or fees, we commend for reading the 4/1 DCA’s opinion in Felczer v. Apple, Case No. D077314 (4^th Dist., Div. 1 April 23, 2021) (published).

            A subclass of retail workers had been $2,000,000 in damages against defendant Apple Inc. for wage-and-hour violations following a combined jury/bench trial.  When the trial court entered judgment in September 2017, it noted that costs would be later determined.

            In March 2018, the trial court awarded over $2,000,000 in Code Civ. Proc. § 1021.5 attorney fees to class counsel, plus an additional $440,000 in costs a month later after partially granting Apple’s motion to tax costs.  Although ultimately including the amounts for the fees and costs awards in the original judgment, the trial court did not specify when interest on the fees and costs would begin.

            During proceedings for a distribution plan an appropriate notice to class members, a dispute arose between the parties as to the date interest was to begin accruing on the fees and costs awards.  Plaintiffs argued that fees and costs, which are typically determined at a later time, retroactively become a part of the judgment, and that interest on the award of fees and/or costs runs from the date judgment was entered – in this case from September 2017. Apple argued interest runs on fees and costs awards from the date the amounts of those awards are determined – in this case from the March and April 2018 dates.  The trial court entered an order in line with Apple’s position.

            Plaintiffs appealed – relying on Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4^th 125 (2010), which holds that interest ordinarily begins on the date of judgment.  However, the panel found Lucky did not reach all aspects of the issue before it because the prevailing party’s entitlement to fees was clear in Lucky – not so here as the judgment in this case established plaintiffs’ right to certain costs, but did not include attorney fees. 

            Ultimately, following the approach used in Copper Liquor, Inc. v. Adolph Coors Co. (5^th Cir. 1983) 701 F.2d 542 in constructing the Enforcement of Judgments Law – with Code Civ. Proc. § 685.020 providing that interest begins to accrue on a money judgment on the date that “judgment” was entered, and § 680.270 establishing a money judgment as that part of a judgment that requires the payment of money – the panel concluded that interest begins accruing as soon as a money judgment establishing entitlement to recover funds is entered, whether or not that recoverable amount has been determined, as “[w]aiting until the amount is certain would only create incentives for the judgment debtor to delay the final accounting.”

        As to the interest on costs, the 4/1 DCA reversed and remanded with instructions for the trial court to enter an order awarding interest on the costs from the September 2017 judgment date as the September 2017 judgment included a money judgment for certain costs – even though the precise amount was to be determined at a later date.  As to interest on the attorney fees award, the panel affirmed – finding no money judgment on attorney fees had been entered until the trial court made a decision as to plaintiffs’ right to the fees in March 2018.

Ethics, Interest, Reasonableness Of Fees, Retainer Agreements: Where Fee Agreement Is Compliant/Enforceable Under B&P § 6148, Unconscionability Factor Guides Contractual Fees Charged And Reasonableness Governs Atty. Performance Under Retainer Agreement

Attorney Obtained Substantial Pretrial Attachment, But He Did Not Obtain Substantial Interest On Delinquent Fees Because No Interest Provision Was Present In The Retainer Agreement.

            Pech v. Morgan, Case No. B300524 (2d Dist., Div. 3 Mar. 11, 2021) (published) is an instructive decision indicating how enforceable, compliant fee agreements are dealt with in pretrial attachment/merit situations and also providing some tips on some provisions to include in retainer agreements.

            This case involved an attorney suing clients for a pretty large attorney’s fees receivable where there was a retainer agreement compliant under B&P § 6148 (the provision which sets forth what needs to be contained in non-contingency retainer agreements) and work on the same basis for some other matters on the same terms.  The retainer agreement did contain a provision requesting the clients to object to any invoices, which clients did selectively to only four statements over a number of years.  The retainer agreement did not contain a provision indicating the attorney could charge interest. 

            The attorney sued based on the retainer agreement and an implied-in-fact agreement that further work was encompassed within the retainer terms (the latter theory permissible under section 6148(d)(2)).  Attorney sought a pretrial attachment against certain assets of clients, seeking $821,000 in fees and accrued interest in excess of $298,000.  Clients opposed on the basis that the fees being claimed were not reasonable under a lodestar analysis (despite the existence of a retainer contract with specified rates).  The trial judge, after rejecting the clients’ expert analysis on the reasonableness of the work effort, granted the delinquent fee request but did not award interest based on the lack of an interest provision in the retainer agreement.

            The 2/3 DCA affirmed.

            After observing there was an analytical gap on the measure of recovery for B&P noncompliant agreements (quantum meruit) versus enforceable fee agreements (one would presume contractual, but with no published decisions addressing), the Court of Appeal—giving deference to a 1993 advisory by the State Bar’s Committee on Mandatory Fee Arbitration—decided that enforceable, compliant fee agreements should be enforced by their terms, not quantum meruit, as long as the fees were not unconscionable under Rules of Professional Conduct Rule 1.5.  So, in essence, the contractual terms prevailed unless the fees were unconscionable, which was not the case.  This made sense because lodestar analysis is really aimed at what an opponent would pay to a prevailing party such that different reasonableness concerns enter into the picture.  With respect to the attorney’s performance under the retainer agreement, that was governed by a reasonableness standard—but nothing showed that the attorney did subpar work.  The pretrial attachment order was affirmed.

            But there are two additional takeaways from this opinion.  First, retainer agreements should contain a provision requesting the client to object to any invoices—this one here had no time limits and there were some objections which apparently were resolved, which aided the courts at both levels in determining that the attorney’s conduct was reasonable.  Second, if you want interest (and keep in mind attorney here “lost” about $300,000 in potential interest), make sure you have a retainer provision indicating interest will be charged (see State Bar’s Standing Comm. on Professional Responsibility and Conduct Formal Opn. No. 1980-53). 

Allocation, Homeowner Associations, Interest, Special Fee Shifting Statutes, Standard of Review: Plaintiff Owner/Developer’s Award Of $1,673,691 In Damages and Entire Fee Request Upheld On Appeal

Defendant HOA’s Breach Of Owner/Developer’s Valid Contractual Access Rights Was The Common Core Involved In The Causes Of Action, So Apportionment Of Fees Not Required.

            In Millennium-Diamond Road Partners v. Diamond Bar etc., Case No. B285539 (2^nd Dist., Div. 3 Sept. 24, 2019) (unpublished), Owner/Developer Millennium sued HOA when it revoked Millennium’s access to undeveloped parcels of land Millennium had purchased for the purpose of developing residential properties. 

            The undeveloped parcels of land were landlocked and adjacent to a guard-gated residential community known as Diamond Bar Country Estates.  From 1997 until October 2013, Millennium had easement access via Country Estates – access that was abruptly revoked when a new group of board members began to oppose Millennium’s development.

            Substantial evidence doomed HOA at trial – with the trial court finding that HOA breached Millennium’s valid contractual access rights pursuant to CC&Rs, a second contractual agreement providing Millennium an option for access rights for which Millennium had tendered the required fee, and a recorded annexation agreement under which the Millennium parcels became a part of the Country Estates development. 

            HOA argued that the CC&Rs were not at play as Millennium had not paid monthly assessments.  HOA also claimed Millennium had failed to pay fees owed under the annexation agreement.  The trial court rejected both claims.  The language of the CC&Rs contradicted HOA’s argument– providing the HOA “no power to cause a forfeiture or abridgement of an Owner’s right to full use and enjoyment of his Lot” absent a judicial/arbitral order or foreclosure.  The annexation agreement did include a schedule of payments to be made to the HOA.  However, the first payment under the schedule was triggered by an event that had not yet occurred, so no annexation fees were yet due.

            At trial, Millennium’s expert testified and explained his computations of Millennium’s damages of $1,673,691 in detail.  HOA did not challenge his methodology or calculation, nor did it call its own expert witness regarding damages, and the trial court awarded the entire amount Millennium claimed as damages.  Additionally, the trial court awarded Millennium prejudgment interest at 10% with a start date of January 2014.

            Millennium’s win triggered an award of attorneys’ fees pursuant to Civil Code section 5975(c) which mandates the award of attorneys’ fees in a successful action to enforce the governing documents of a common interest development.  The trial court awarded the full amount requested with no apportionment.

            HOA appealed, but fared almost no better – achieving only a small victory related to the start date for calculation of the prejudgment interest.  The 2/3 DCA found substantial evidence supported the trial court’s decision, but remanded for prejudgment interest calculations to begin on March 23, 2017 instead of January 2014.  It further determined that the HOA had fashioned its appeal largely “as an attack on the factual findings of the trial court.”  Citing Waller v. Brooks (1968) 267, Cal.App.2d 389, 393, the 2/3 DCA stated that the HOA “misconceiv[ed] the function of an appellate court which is to review errors of law, and not to pass on questions of fact.”

            As to apportionment of the attorney fees, the 2/3 DCA found no abuse of discretion as Millennium’s causes of action were so intertwined, and involved a common core of facts which were directly related to enforcement of the governing documents, such that apportionment was impracticable.

Interest, Judgment Enforcement: Reversal Of Judgment And Remand, Which Really Was An Upward Modification, Required That Interest On The Attorney’s Fees Award Should Run From The Date Of Original Judgment

Substance Of The Order Was Determinative.

            In Pacifica Companies LLC v. Patel, Case No. D074358 (4th Dist., Div. 1 Sept. 23, 2019) (unpublished), the 4/1 DCA in an earlier decision reversed a trial judge order denying a request for contractual attorney’s fees based upon a letter of intent agreement, remanding so that the trial judge could enter an award of reasonable prejudgment attorney’s fees.  On remand, the trial judge did just that, awarding defendants over $1.42 million in fees (out of a requested more than $2.4 million) and denying the request for 1.5 lodestar enhancement.  The trial judge then ordered that interest on the fee award should run from the date of the original judgment rather than the date of the fee award on remand.

            Plaintiffs appealed on the interest trigger date, but they lost their challenge.  After surveying several California decisions, the Pacifica II appellate panel decided that the substance of the remand was an upward modification of the judgment (even though framed like a reversal), such that interest ran from the date of the original judgment. 

Interest/Postjudgment Enforcement: Interest Accrues On First Entry of Judgment, Even When Costs (Fees Included) Are Included Later

Complicated Interpleader Dispute Still Results In Interest Accrual Result Described Above.

            Wertheim, LLC v. Currency Corp., Case No. B270926 (2d Dist., Div. 5 Aug. 25, 2017) (unpublished) involved a complicated interpleader/postjudgment dispute between various parties, among which was an insurer of an appeal bond in favor of plaintiff Wertheim.  For purposes of this blog, Wertheim won a postjudgment accrual of interest issue that implicates attorney’s fees and costs.  Specifically, the Court of Appeal concluded that interest begins to accrue on an initial judgment amount, even if it is later amended to include significant costs and attorney’s fees.  However, in an interesting twist, the appellate panel concluded interest stopped once the appeal bond surety tendered a rejected check to the superior court during convoluted proceedings, although it did agree that simply obtaining an appeals bond was not the equivalent of a tender or payment of the judgment for purposes of stopping interest accrual.

Costs/Interest: Prevailing Attorney Entitled To Recover Routine Costs And Interest On Routine Costs Since Date Of Original Judgment

 

10% Per Annum Rate Governed Costs Award.

    In our June 19, 2014 post, we discussed Chodos v. Borman, 227 Cal.App.4th 76 (2014) (Chodos I), where the appellate court refused to sustain a multiplier were the attorney had no retainer agreement with the client such that the lodestar, with two stipulated adjustments, adequately compensated the attorney.  That was not the end of the story, though.  The lower court entered a new final judgment following the first appellate remittitur, but apparently did not award trial costs from Chodos I or interest on the requested costs.

    Those omissions were cured in Chodos v. Borman, Case No. B260326 (2d Dist., Div. 5 Aug. 18, 2015) (published) (Chodos II).

    The appellate court determined that attorney was entitled to routine trial costs of $12,983.99 as a matter of right under an unopposed costs memorandum.  Also, attorney was entitled to interest at 10% per annum on the costs award running from the date of the original judgment.  (Code Civ. Proc., § 685.020(a).)

Interest, Judgment Enforcement: Where Fee Award Had Been Paid Prior To Entry Of Judgment Of Dismissal Based On CCP Section 998 Acceptance In Lemon Law Case, Plaintiff Not Entitled To Postjudgment Interest On Fee Award

 

Plaintiff’s Attempt To Depose Hyundai CEO For $462.50 Did Not Impress Appellate Court, Much Less Hyundai’s Emergency Stay Request.

     We knew that the decision in Hyundai Motor America v. Superior Court, Case No. G051279 (4^th Dist., Div. 3 Mar. 20, 2015) (published) was going to be interesting, because it kicked off with this quote: “Nature, not judges, should be in charge of making mountains out of mole hills.” (Crum v. City of Stockton, 96 Cal.App.3d 519, 524 (1979) [Reynoso, J., concurring & dissenting].)

     Here, plaintiff brought a lemon law case against Hyundai, eventually accepting a defense 998 offer by which the car would be returned, the lawsuit dismissed, Hyundai would pay certain money back to the car buyer and lienholder, and the buyer’s attorney’s fees and costs would be determined by court motion. Plaintiff eventually accepted a check in payment of the 998 amount, then moving for recovery of $60,536 in fees and interest. The trial judge awarded $42,203 in fees, denied the interest request, and dismissed the case, prompting an appeal by plaintiff from the dismissal minute order.

     Subsequently, Hyundai tendered $42,203 in payment of the fees award, but plaintiff claimed it was short on post-award interest of $462.30. The appellate court later informed plaintiff it might dismiss the appeal, but plaintiff rectified by this by filing a proposed judgment resulting in issuance of a formal judgment of dismissal. Plaintiff then sought to depose Hyundai’s CEO in a debtor judgment exam after incurring another $13,000 for additional interest and fees relating to the $462.50 interest claim. (As the appellate panel noted, the $13,000 claim was “one of the best growth investments we have seen.”) This prompted Hyundai to file a writ and seek an emergency stay relating to the debtor exam, with the stay being granted pending further order of the appellate court.

     Hyundai won its writ petition claiming that the debtor exam was unnecessary because no interest was due on the satisfied fee award. This was so because postjudgment interest only accrues, by law, on a final judgment. (Code Civ. Proc., § 685.020; Civ. Code, §1794(d).) The only final judgment was the judgment of dismissal, not the prior minute order. The fee award has already been paid before the judgment of dismissal was entered, so no interest was due.

     However, the writ panel publishing this decision—Justices Rylaarsdam, Aronson, and Thompson—did caution both sides about contesting such small interest and seeking an emergency writ stay (versus Hyundai seek a protective order based on the debtor exam being akin to an “apex” deposition).

X

Costs, Interest, Section 998: Prejudgment Interest Not Allowable On Costs Awards, 4/1 DCA Rules

 

Court of Appeal Did Affirm 998 Cost-Shifting As To Rejected 998 Offer.

     In Bean v. Pacific Coast Elevator Corp., Case No. D064587 (4^th Dist., Div. 1 Mar. 10, 2015) (partially published; prejudgment interest on costs discussion published/998 costs discussion not published), plaintiff won a substantial $1.271 damages award resulting from a rear end vehicle accident against an employer whose employee ran into him. The lower court later awarded costs under CCP § 998 as well as prejudgment interest on those costs.

     The appellate court affirmed all rulings, but the prejudgment interest on routine costs. It determined that prejudgment interest is only allowable as to damages under Civil Code section 3291, with damages being much different than routine costs.

     The 998 cost shifting in favor of plaintiff was also sustained. The defense rejected a $999,999 section 998 offer from plaintiff, with plaintiff recovering $1.271 million after a trial. The 998 offer was “spot on,” with the defense having enough medical evidence and indication that plaintiff’s injuries were serious so as to support the conclusion the offer was reasonable and made in good faith.

Civil Rights/Costs/Interest: Attorneys, Not Clients, Are Entitled to Postjudgment Interest On Fee Award And Likely Entitled To Routine Costs Recovery

 

. . . Unless Retainer Agreement Requires Otherwise.

     Hernandez v. Siegel, Case No. A139653 (1^st Dist., Div. 5 Sept. 30, 2014) (published) decided, unless a client-attorney retainer agreement dictates otherwise, post-judgment interest on a fee award and routine costs generally are interests vested in the attorney, rather than the client. The appellate court placed great reliance on Flannery v. Prentice, 26 Cal.4^th 572 (2001) in reaching its result on the fee post-judgment interest issue.

Interest: Interest Runs On Postjudgment Fee Awards From The Date Of “Fixing” Of Actual Awards, Not From Date Of Original Judgment

 

     The First District, Division 5 in Lucky Unified Properties Investments, Inc. v. Lee, Case No. A132914 (1st Dist., Div. 5 Feb. 4, 2013) (partially published) provided clarity on the issue of when interest begins to run on postjudgment fee/costs awards where the fees/costs were incurred postjudgment or on appeal. The appellate court determined that, in both cases, interest began to run from the date of “fixing” of the postjudgment cost/fee awards, not earlier. Although determining that a trial court award of fees and costs for appellate work is incorporated into the original judgment for enforcement purposes, interest does not begin to run until the date that the appellate costs/fees are “fixed” by the lower court.

Multipliers/Interest On Fee Awards: Khazan III Comes Down, Affirming Trial Court Award Of Lodestar And Multiplier

 

Appellate Court Dismisses Applying Perdue in California State Court Cases and Affirms that Interest Ran From Date of Remanded New Fee Determination.

     In our March 31, 2009 post, we extensively discussed Khazan v. Braynin (Khazan II), an unpublished appellate court decision where the First District, Division 4 remanded a fee award because it felt some apportionment and relook at the degree of success justifying the fees actually awarded was warranted on the part of the lower court. It also wanted the lower court to consider when interest should run -- from the date of earlier awards or the date of the new fee decision on remand.

     We can now report that the trial judge did award significant fees to prevailing plaintiffs, to the tune of $1,370,604, under Civil Code section 1717 based on a fees clause, apportioning out some time and also considering the degree of success. The judge also found that the prior appellate opinion was a reversal, so interest on the fee award ran from the date of its new fee decision on remand. The appellate court was happy with these determinations, affirming in Khazan v. Braynin (Khazan III), Case No. A128536 (1st Dist., Div. 4 Sept. 12, 2012) (opinion following rehearing).

     Two points caught our eye in Khazan III.

     First, appellants argued that the 1.5 multiplier awarded by the lower court did not follow the directives of Perdue v. Kenny A., 130 S.Ct. 1662 (2010), which in a civil rights context indicated positive enhancements are only appropriate for rare and exceptional cases. The Khazan III court rejected the invitation to apply the standards of Perdue to the case, determining that California law was different and did not disfavor enhancements. (Ketchum--one of our Leading Cases--confirmed that enhancements are appropriate under section 1717, although we might add that have not seen multipliers awarded in many 1717 cases.)

     Second, because the appellate remand was tantamount to a reversal requiring the lower court to review evidence and reset the award, interest on the fee award was found to run only as of the date of the new remand decision affirmed on appeal. (Discussing Stockton Theatres, Inc. v. Palermo, 55 Cal.2d 439, 440-444 (1961); Snapp v. State Farm Fire & Cas. Co., 60 Cal.2d 816, 817-820 (1964); Munoz v. City of Union City, 173 Cal.App.4th 199, 202-203, 207 (2009); Ehret v. Congoleum Corp., 87 Cal.App.4th 202, 204, 210 (2001) [discussing difference between reversal and mere modification for purposes of when interest should run on a fee award].)

Lodestar/Multiplier/Postjudgment Enforcement Interest: Published Decision Considers When Interest Runs On California State Fee Awards

 

Also Rejects Application of Perdue v. Kenny A. To State Cases Involving Lodestar Multipliers.

     Khazan v. Braynin, Case No. A128536 (1st Dist., Div. 4 May 30, 2012) (certified for partial publication; fee interest issue published) is an interesting decision that has a scholarly discussion on when interest begins to run on a fee award. The opinion basically held that Stockton Theatres, Inc. v. Palermo, 55 Cal.2d 439 (1961) is still good law, and that interest accrual timing depends on whether there was a reversal versus just a modification of a prior fee award. If a reversal (as in Khazan, where the fee award papers had to be reconsidered on remand), then interest runs from the new award as compared to interest running from the original award if there was just a modification. Khazan also has an interesting discussion of the federal rule, where there is a split on whether interest runs from the date of a fee entitlement award or from the date of the fixing of the amount of fees, and the differences in rates of interest (10% per year in California state courts versus interest tied to T-bill rate in the federal system).

     In the unpublished portion of the case, the appellate court affirmed a substantial lodestar award, reduced by 30% on remand after apportionment of noncompensable or unsuccessful claims, and then enhanced by a 1.5 multiplier (for a total award of $1,115,204 to the lead counsel). The interesting aspect of the discussion here is that the appellate court rejected application of Kenny A. v. Perdue, 130 S.Ct. 1662 (2010) to state multiplier situations, finding that the considerations in federal fee-shifting cases were distinguishable and that California is more liberal in allowing enhancements.