CALIFORNIA ATTORNEY'S FEES

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

Unique Facts Of The Case Governed The Outcome.

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  De Witte Mortgage Investors Fund, LLC v. Carradine, Case No. B322747 (2d Dist., Div. 1 Dec. 19, 2023) (unpublished) vindicates that general principle.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

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

Landlord/Tenant, Reasonableness Of Fees: $358,133.56 In Fees Against Tenant Operating Two Illegal Marijuana Dispensaries Affirmed On Appeal

Two Law Firms’ Requests Were Largely Sustained By Reviewing Court.

            City of Santa Ana v. Yuh, Case No. G060889 (4^th Dist., Div. 3 Jan. 24, 2023) (unpublished) was a situation where a tenant lost an abatement action against the City of Santa Ana for operating two illegal marijuana dispensaries.  Two firms representing the City moved for attorneys’ fees, with the trial judge—after some reductions—awarding $358,133.56 against tenant.  In an opinion authored by Justice Sanchez, the fee awards were confirmed because the tenant did not specify objections to the fee requests.  After all, the trial judge did make some reductions.  This is yet another opinion showing the potential “bite” of fee exposure to tenants in these types of disputes. 

Landlord/Tenant, Reasonableness Of Fees: $684,000 Fee Award In Favor Of Tenants And Against Landlord Reversed And Remanded

Appellate Court Did Not Buy That Trial Court Could Just Adopt Plaintiffs’ Voluntary Reduction Without Addressing Other Objections.

            We posted today about a published decision between the parties.  Separately, Sarkany v. West, Case No. A161728 (1^st Dist., Div. 2 Aug. 30, 2022) (unpublished) was landlords’ appeal from an adverse $684,000 attorney’s fees award in favor of tenants after a favorable jury verdict, with the fee entitlement not being contested.  Without much of an explanation, plaintiffs reduced their $1.134 million fee request (inclusive of a 1.5 multiplier) by $141,245.50.  The trial court bought it, awarding a little over $684,000 to plaintiffs on the lodestar request, but denying a positive multiplier. The appellate court did not buy it.  The voluntary reduction did not address the defense objections to the fee motion, much less the trial judge’s concerns that a reduction might be justified based on plaintiffs’ sanctionable and litigious conduct.  It simply could not determine that these factors were considered, so a re-do was ordered.  One of the defendants argued no fee award was justified based on indigency, but the appellate court could only find this was a consideration for a plaintiff’s indigency, not a defendant’s indigency.  (Garcia v. Santana, 174 Cal.App.4^th 464, 476 (2009).)

Civil Rights, Landlord/Tenant: Frivolous FEHA Case By Plaintiffs In Rental Dispute Justified $228,123.77 Attorney’s Fees, Expert Fees, And Costs Award In Favor Of Prevailing Defendant Owner

No Abuse Of Discretion Shown, With Prior Denial Of Summary Judgment Not Disqualifying Owner From Award Of FEHA Fees Under The Right Circumstances.

            FEHA has a pro-plaintiff fee shifting statute; however, under the right circumstances, a prevailing defendant can obtain fee shifting against a plaintiff where the case is shown to be frivolous in nature.

            That was the case in Bonhage v. Rawson, Case Nos. H047362 et al. (6^th Dist. July 18, 2022) (unpublished), which involved two plaintiff friends’ Unruh Act and FEHA case against defendant owners and brokers for failing to rent to them based on “unmarried persons” discrimination.  Brokers got out on a summary judgment motion, owner’s summary judgment motion was denied, and plaintiffs lost their case against owner after a full trial.  The lower court determined plaintiffs’ case was frivolous, awarding owner $228,123.77 in attorney’s fees, expert fees, and other costs under the FEHA statutory provision.

            The result was affirmed on appeal.  Under an abuse of discretion standard, the lower court could conclude that plaintiffs had no evidence of discrimination, especially given that the owner had rented to other unmarried couples before, and that the rental transaction fell out because the plaintiffs could not agree on a rental sharing agreement.  Finally, the caselaw in this area shows that a prior denial of a summary judgment to an eventually prevailing defendant does not disqualify that defendant from a frivolous FEHA fee recovery.

Landlord/Tenant: Reversal Of A Directed Verdict Claim Meant Costs Award Was Reversed

However, Fee Award On A Withdrawn Claim Was Not Challenged On Appeal And Not Impacted By The Directed Verdict Reversal.

            In Pennypacker v. Yuen, Case Nos. A157680/A157985 (1^st Dist., Div. 2 June 15, 2022) (unpublished), tenant asserted tort, inhabitability, San Francisco administrative code claims, and a UCL claim against landlord.   Landlord made a pretrial CCP § 998 offer for $15,000, which tenant did not accept.  Tenant withdrew an administrative code claim bearing fee exposure on the first day of trial.  The lower court directed a verdict on the other administrative code claim, but the tenant won an award of $13,000 from the jury based on tort/inhabitability claims.  Given that the jury verdict was less than the $15,000 § 998 offer, the lower court awarded landlord costs of $51,507.09 and attorney’s fees of $9,495.72 as the prevailing party.

            Tenant’s appeal produced a reversal of the directed verdict order, which meant that the $51,507.09 costs award had to be vacated to see what happens on remand.  However, the fee award stood up for two reasons: (1) tenant never challenged it on appeal; and (2) it was not impacted by the reversal of the directed verdict because it dealt with a voluntarily withdrawal of a claim not involved in the directed verdict ruling.

Arbitration, Fee Clause Interpretation, Landlord/Tenant: 1/3 DCA Affirms Trial Court’s Denial Of Attorney Fees To Prevailing Tenant

Fees Incurred For The Court Proceedings Were Part Of The Arbitration Process Called For In The Lease For Resolving Fair Market Rent Value And Not Recoverable Under The Prevailing Party Provision Which Applied To An Action Involving A Breach Of The Contract Or Determination of Rights

            In California Union Square L.P. v. Saks & Company LLC, Case No. A162043 (1^st Dist., Div., 3 October 29, 2021) (published), defendant tenant exercised its option to renew its lease following the initial 25-year term.  Because landlord and tenant were unable to agree on the fair market value of the base rent, the dispute resolution provision of the lease was triggered – which mandated arbitration.  Tenant ultimately prevailed after two arbitrations and multiple litigation proceedings in superior, federal, and appellate courts – including a petition for review with the California Supreme Court (which was denied).   Tenant then moved for roughly $1 million in attorneys’ fees – expressly noting that, pursuant to the fees provision of the lease, it was seeking fees incurred only in court proceedings, not any of the fees or costs incurred in the two arbitrations.   The trial court denied tenant’s motion following full briefing and a hearing.

            Tenant argued on appeal that the trial court erred because the parties’ lease – although providing that arbitration costs were to be divided equally between the parties – included a provision mandating “that the prevailing party in any action or proceeding to enforce the [l]ease or obtain a declaration of rights under the [l]ease recover its attorneys’ fees and costs from the losing party.”  Tenant claimed this prevailing party provision controlled the allocation of fees for the various court proceedings.  The appellate panel disagreed – finding the court proceedings were not undertaken for the purpose of enforcing or obtaining a “declaration of rights” under the lease, such as a dispute over a contractual term or obligation.  Rather, the court proceedings arose from the parties’ obligations under the provision for disputes on the fair market value of the base rent requiring arbitration.  As a result, the fees incurred for the court proceedings were a part of the process for resolving the value of the base rent and not recoverable under the prevailing party provision.

Allocation, Landlord/Tenant, Retainer Agreements: $910,752.50 Fee Award Under San Francisco Rent Ordinance Fee-Shifting Clause Affirmed On Appeal

Trial Judge Did Reduce Requested Lodestar By More Than $70,000—About 60% Of The Request, Although Refusing To Award A Positive 1.5 Multiplier.

            Landlords in Duncan v. Kihagi, Case No. A154678 (1^st Dist., Div. 1 Oct. 6, 2021) (unpublished), were not pleased when a trial judge awarded $910,752.50 in fees in favor of the winning tenants where there was a fee-shifting provision in a San Francisco Rent Ordinance (a common feature of many municipal rent ordinances), although reducing the lodestar request by over $70,000 and declining to award a 1.5 positive multiplier.  The appellate court affirmed.  The fee claimants did not have to apportion a lot of the work because it was interrelated to the success under the Rent Ordinance, even though some claims were abandoned in order to streamline the trial.  Streamlining was not deserving of punishment.  Isolated challenges to some billing entries did not change things, given the lodestar reduction by the lower court.  The hourly rates for a 20+ year attorney ($425) and for a more senior founding partner ($525) were not excessive for Bay Area practitioners in such a case.  The contingency retainer agreement did not have to be introduced into evidence because the contractual terms do not compel any particular fee award.  (Vella v. Hudgins, 151 Cal.App.3d 515, 520-521 (1984).)  Finally, the financial impact of the fee award on landlords was not a mandatory factor to consider.  (Garcia v. Santana, 174 Cal.App.4^th 464, 467 (2009).) 

Landlord/Tenant: 2/4 DCA Affirms Denial Of LARSO Statutory Damages And Attorney Fees To Prevailing Tenant, And Affirms Award To Tenant Of Only $500 In Fees, Out Of The $71,000 Incurred, Pursuant To Amendment Capping Fees In Parties’ Lease

Tenant Failed To Assert Claims For Statutory Damages And Fees Under LARSO In The Lawsuit As Required, And The Fees Cap Was Valid.

            In 510PacificAve v. Weiss, Case No. B304369 (2d Dist., Div. 4 June 29, 2021) (unpublished), owner of an apartment building in Venice served tenant with notice of a 25% rent increase due to unauthorized occupancy of tenant’s apartment by her boyfriend.  The Venice apartment building is subject to the City of Los Angeles Rent Stabilization Ordinance (L.A. Mun. Code,1 ch. XV, §§ 151.00 et seq.) (LARSO).  When tenant disputed the increase, owner filed a lawsuit seeking declaratory relief regarding the applicability of a paragraph in the parties’ lease permitting such an increase.

            Six weeks after the trial court issued its final statement of decision – wherein it found that that the lease paragraph at issue was valid and enforceable to the extent it complies with the requirements of LARSO § 151.06(G), but that the rent increase was unenforceable for exceeding the limits of § 151.06(G) – tenant filed a motion for attorney fees and statutory damages under § 151.10.A (LARSO penalty ordinance mandating damages and fees/costs as determined by the trial court).  The trial court denied tenant’s request for both fees and statutory damages on the ground that § 151.10.A. was inapplicable because tenant never filed a cross-complaint or pled a claim for statutory damages.  However, the trial court awarded tenant $500 in attorney’s fees, of the more than $71,000 she claimed to have incurred, pursuant to an amendment to the parties’ lease that capped prevailing party attorney fees at $500. 

            Tenant appealed, and the 2/4 DCA affirmed.  Section 151.10.A. requires a defendant claiming statutory damages make the claim in the lawsuit – which tenant did not do – so that landlord’s liability, if any, may be determined at trial.  Additionally, the panel found no merit to tenant’s claim that the lease amendment capping attorney fees was statutorily illegal or in violation of LARSO.

Landlord/Tenant: Property Caretaker And Listing Agent, After Foreclosure, Were Not Landlords So As To Provide Fee Entitlement Under Civil Code Section 789.3(d)

Fee Entitlement Was Not Established Factually.

            In Neff v. Boschee, Case No. B302775 (2d Dist., Div. 6 Apr. 20, 2021) (unpublished), former tenants who were ousted after a bank foreclosure sought attorney’s fees against a property caretaker and a listing agent, even though nothing established they were landlords of the property even though they did obtain a modest jury verdict on certain theories.  The trial court denied attorney’s fees to prevailing parties against the fee opponents, under Civil Code section 789.3(d), because nothing established that they were landlords.  The 2/6 DCA agreed, because the defendants were merely a post-foreclosure caretaker or a real estate listing agent involved in post-foreclosure activities—neither were landlords. 

Fee Clause Interpretation, Landlord/Tenant: $93,913.85 Fee Award In Favor Of Residential Defendant Affirmed On Appeal

Conversion Claim Arose From The Lease, With Other Arguments Forfeited On Appeal.

            Where appellants fail to make arguments at the trial court level or in an appellant’s opening brief, they may be subject to having their challenges forfeited on appeal.  That largely happened in Ghannoum v. Sevier, Case No. B304026 (2d Dist., Div. 2 Apr. 7, 2021) (unpublished).

            Defendant tenant defensed a non-signatory residential property owner’s lawsuit based on damaging property in the premises after defendant was evicted.  The trial court awarded defendant $93,913.85 out of a requested $116,527.10 based on a lease attorney’s fees clause. 

            That result was affirmed on appeal.  Many of the arguments on appeal were dismissed because they were not raised at the trial court level or raised in appellants’ opening brief.  With respect to the gist of the claim, a conversion based on a contract can give rise to fee recovery, Mustachio v. Great Western Bank, 48 Cal.App.4^th 1145, 1151 (1996), which it did as far as triggering fee entitlement in this particular case.

Landlord/Tenant: 1/4 DCA Affirms $44,736.50 Attorney Fees Award To Landlord For Trial Court And Appellate Work In Enforcing Settlement Agreement With Attorney Fees Provision

Tenants Had Waived Their Right To Appeal, And Failed To Support Their Claim That The Settlement Agreement As A Whole Was Unenforceable Due To Violations Of Civ. Code §§ 1942.1 and 1953.

            In Park Lane Associates, LP v. Alioto, Case No. A155781 (1^st Dist., Div. 4 March 5, 2021) (unpublished), plaintiff landlord and defendant tenant couple entered into a settlement agreement with a stipulation for entry of future judgment, in the event of breach of the agreement, following a dispute regarding disruptive construction in the penthouse above defendant tenants’ apartment.  The settlement agreement – which included an attorney fees provision – forgave one month of defendants’ arrearages in rent and reduced their rent by $1,000 for 11 months.  In return, defendants agreed to hold plaintiff harmless for any inconveniences resulting out of all past, current and future construction occurring in or around the building.  Additionally, defendants waived their right to appeal should judgment be entered.  Four months later, defendants withheld their rent and joined other tenants in a lawsuit against plaintiff seeking damages and injunctive relief as a result of the ongoing construction work in the penthouse.

            Plaintiff then moved to enforce the agreement – contending defendants breached the agreement.  The trial court entered judgment pursuant to the terms of the agreement, but stayed the judgment on the condition that defendants reimburse plaintiff for its attorney fees in bringing the motion.  After the trial court lifted the stay, defendants unsuccessfully appealed – claiming the trial court abused its discretion in lifting the stay and declining to relieve defendants of their obligation to pay plaintiff’s attorney fees.

            Afterward, plaintiff moved post-judgment for $56,393.50 in fees it incurred in the trial court and on appeal.  After some deductions for entries unrelated to enforcement of the settlement agreement, the trial court awarded plaintiff $44,736.50 pursuant to the fee provision in the agreement. 

            Defendants appealed, claiming the fees provision was invalid as the agreement violated Civ. Code §§ 1942.1 and 1953, and was as a whole unenforceable as against public policy because a tenant’s rights to a tenable and habitable dwelling cannot be waived by agreement. 

            The 1/4 DCA affirmed – finding no substantial injustice in enforcing the agreement.  Defendants had entered into the agreement when they were facing termination of their tenancy under the Ellis Act – acknowledging that construction in the penthouse would continue, and agreeing that forgiveness of the one month of arrearages and a reduction in 11 months of rent was sufficient compensation for the disruptions related to the construction.  Additionally, defendants failed to show that their apartment substantially lacked the standard characteristics set forth in section 1941.1.  As to section 1953 – which prevents tenants from waiving certain procedural rights in a residential lease agreement – the panel found no substantial injustice in allowing parties to waive claims in settling litigation.  “[T]enants and landlords [can], however, waive or modify procedural rights in an agreement entirely independent of the rental agreement.” (Williams v. 3620 W. 102nd Street, Inc., 53 Cal.App.5th 1087, 1092 (2020), citing Jaramillo v. JH Real Estate Partners, Inc. 111 Cal.App.4^th 394, 404 (2003).

Appealability, Landlord-Tenant, POOF!: Reversal Of Unlawful Detainer Judgment Against Landlords Required Reversal Of Related Attorney’s Fees/Costs Award

In Separate Merits Appeal, Appeal Was Cognizable Although Possession Returned To Landlords During Appeal Because Review Would Determine Landlord Liability For Fees/Costs.

            In Lee v. Kotyluk, Case No. G058631 (4^th Dist., Div. 3 Jan. 7, 2021) (published), landlords sought to evict a commercial tenant for selling marijuana without a license.  The lower court found the 3-day notice to pay or quit was defective because the notice was sent by a predecessor in interest and the notice contained no precise directions to whom possession should be delivered (the “quit” component of the 3-day notice).  A defense motion for judgment on the pleadings was granted, and plaintiffs’ request to amend the complaint was denied, triggering the first appeal by landlords.  Later, the lower court granted $25,794 in attorney’s fees and $1,445 in costs against landlords, which prompted a separate appeal in Lee v. Kotyluk, Case No. G058768 (4^th Dist., Div. 3 Jan. 7, 2021) (unpublished).

            Landlords’ merits appeal resulted in a reversal of the judgment against landlords, because the motion for judgment was properly granted but landlords should have been given leave to file an amended pleading.  That appeal was not rendered moot because tenant surrendered possession of the premises.  The reason?  Landlords’ liability for the trial level fees and costs awards presented a live controversy not mooted by the surrender.  In the unpublished opinion, the merits reversal meant that the fees and costs awards went POOF!  Acting Presiding Justice Moore authored both 3-0 opinions.

Landlord/Tenant, Section 1717: Fees Award Of $80,411.50 To Prevailing Plaintiff In Commercial Lease Dispute Affirmed On Appeal

Defendant Failed To Support Its Sole Argument, Raised For The First Time On Appeal, With Evidence, Analysis Or Authority – Thus Waiving Its Only Argument On Appeal – And Its Sole Argument Asked The Appellate Court To Second-Guess The Trial Court’s Evaluation Of The Evidence.

            In KJ Investment Group v. American Heritage College, Case No. G058647 (4^th Dist., Div. 3 January 4, 2021) (unpublished), prevailing plaintiff in a commercial lease action – based on the attorney fees clause in the parties’ lease agreement – moved for almost $145,000 in attorney fees, inclusive of a 1.5 multiplier, plus almost $11,000 in costs pursuant to Civ. Code § 1717 and Code Civ. Proc. Civ. § 1033.5.  Defendant opposed – arguing only that attorney fees must be reasonable and that plaintiff over-litigated the case.  After reductions for time spent by anyone other than plaintiff’s two lead attorneys and rejection of the 1.5 multiplier, the trial court awarded plaintiff $80,411.50 in fees based on its calculation of reasonable time spent by the two attorneys.

            On appeal, defendant argued for the first time that no fees or costs should be awarded to plaintiff because its principal provided inaccurate testimony at trial that was attributable to it counsel – thereby violating Business and Professions Code § 6068 requiring attorneys ‘“never to seek to mislead the court or any judicial officer by an artifice or false statement of fact or law.”’ (§ 6068(d).)

            In a 3-0 opinion, authored by Justice Goethals, the 4/3 DCA affirmed.  Plaintiff’s sole contention was not supported with evidence, analysis or authority – constituting a waiver of plaintiff’s argument on appeal.  The 4/3 DCA also noted that plaintiff’s argument would fail even if it had not been waived because it asked the panel to presume the trial court was misled by false evidence, and that it could not second-guess the trial court’s evaluation of the evidence.  (People v. Hovarter, 44 Cal. 4^th 983, 996 (2008); In re Marriage of Arceneaux, 51 Cal.3d 1130, 1133 (1990).)

Landlord/Tenant, Prevailing Party, Section 1717: Reversal Of $172,375 In Attorney Fees Awarded To Defendant Based On Trial Court’s Abuse Of Discretion In Finding Defendant Was The Prevailing Party

Pursuant To Section 1717, Defendant Was Not The Prevailing Party As It Lost The Sole Cause Of Action In The Case – With The Jury Awarding $45,050 In Damages To Plaintiff For Defendant’s Breach Of The Written Lease Contract.

            Waterwood Enterprises, LLC v. City of Long Beach, Case No. B296830 (2d Dist., Div. 1 December 18, 2020) (published) includes a nice discussion on the proper legal standard for determination of a prevailing party for purposes of attorney fees where neither party achieved a simple, unqualified win on the contract claim(s) based on a contract containing a fees provision.

            In this case, plaintiff sued its former commercial tenant, City of Long Beach, alleging a single cause of action for breach of a written contract – seeking at least $150,000 for property damage.  In its answer, City denied owing anything to plaintiff and raised 18 affirmative defenses.  Each party served the other with § 998 offers which were rejected.  At trial, City admitted that it owed some amount to plaintiff for asphalt damage, but not for any other damages claimed by plaintiff.  The jury returned a verdict in plaintiff’s favor and awarded it $45,050 in damages, but did not identify the repairs for which it awarded damages.

            Both parties moved post-trial for fees and costs, with each arguing they were the prevailing party.  Plaintiff sought $307,068.50 in fees, plus $15,000 for fees on fees for bringing the fees motion, and $12,000 in costs.  City argued it had achieved its main litigation objective to pay “for some, but not all, of the claimed repairs.”  City sought $172,375 in fees, $17,673.50 in costs, and $39,483.50 in expert fees.  The trial court found plaintiff was the prevailing party under Code Civ. Proc. § 1032 for having achieved a net monetary recovery, and awarded it costs of $19,905.04.  But, looking to the parties’ pre-litigation settlement discussions and § 998 settlement offers, the trial court found City was the prevailing party for the purpose of awarding attorney fees.  In awarding City $172,375 in fees, the trial court reasoned that City’s 998 offer was closer to the jury’s damages award than plaintiff’s 998 offer.  Under the amended judgment – which added interest, fees and costs awards – plaintiff ended up owing City $105,432.90. 

            Plaintiff appealed and the 2/1 DCA reversed as to City’s attorney fees award.  On remand, the appellate panel limited the trial court’s discretion to finding either that plaintiff was the prevailing party, or there was no prevailing party for the purposes of awarding fees.

            Section § 1717 governs the determination of prevailing party in an action on a contract containing a fees provision.  The trial court abused its discretion in determining City was the prevailing party by relying on wholly unsupported facts, improper legal criteria, and applying the wrong legal standard.  Trial courts may not consider the parties’ settlement communications in determining the prevailing party under § 1717.  Additionally, although § 998 may permit fee awards in certain circumstances even when a party was not the prevailing party under § 1717, such circumstances require that the party’s § 998 offer exceeded the judgment.  City’s 998 offer did not beat the jury’s damages award. To achieve prevailing party status under § 1717, based on City’s claim its objective was to pay only for some asphalt repair, City would have had to admit and pay its debt prior to the trial – something that did not happen.

Landlord/Tenant, Substantiation Of Reasonableness Of Fees: Landlord Seeking To Overturn $988,539 Attorney Fees Award To Prevailing Commercial Tenants In UD Action Gets Fee Award Reduced By Only $14,125 On Appeal

No Abuse Of Discretion In The Trial Court’s Implied Finding That The Total Time Tenant’s Attorneys Spent Working On The UD Case And Subsequent Appeal Was Reasonable Given The High Stakes Involved In The Litigation.

            In NHP/PMB Burbank Medical, etc. v. Premiere Medical, etc., Case No. B299841 (2d Dist., Div. 7 December 14, 2020) (unpublished), prevailing commercial lease tenants (a medical center and doctor) in an unlawful detainer action were awarded $988,539 in attorney fees on remand.  The 2/7 DCA, concluding landlord’s notices to quit were defective, had previously reversed the trial court’s initial judgment which found in favor of and awarded landlord $1,141,074.60 – comprised of $373,592.68 in rental fees, operating expenses and late charges, $624,207.97 in holdover damages, $53,121.16 in prejudgment interest, and $90,152.79 in attorney fees and costs. 

            On appeal, landlord argued that an award of nearly $1 million in attorney fees – for what it described as a routine unlawful detainer action – was absurd, that tenants failed to show the fees were incurred in the UD action and not the parties’ other related actions, that the award included sums for nonexistent or duplicative work, and that the fees were purposely inflated to approximate the amount of damages landlord anticipated tenants would be found liable for in the other related actions.

            The 2/7 DCA agreed only with landlord’s contention regarding nonexistent or duplicative work – striking $14,125 from the award for such billing entries.  The fees awarded to tenants covered the UD action as well as pre-litigation, post-judgment and appellate work related to the UD action.  The panel found no abuse in discretion in the trial court’s implied finding that the total time expended by tenants’ attorneys was reasonable.  The litigation involved much higher stakes for the tenants than it did the landlord – with medical center’s doctor declaring the unlawful detainer action “posed an existential threat to [his] business and seriously threatened his livelihood” and that if the monetary portion of the initial judgment had been enforced, “it would have been financially devastating to [him] and his family.”  The trial court had correctly observed detailed time or billing records are not required under California law – accepting the declarations and summaries submitted by tenants’ counsel – which listed by broad category the time expended by each attorney.  In fact, the panel observed, this method “has been upheld and even recommended, as ‘an especially helpful compromise between reporting hours in the aggregate (which is easy to review, but lacks informative detail) and generating a complete line-by-line billing report (which offers great detail, but tends to obscure the forest for the trees).’” (Syers Properties III, Inc. v. Rankin, 226 Cal.App.4th 691, 700 (2014) [discussed in our May 06, 2014 post].)

Fee Clause Interpretation, Landlord-Tenant: Landlord Winning Malicious Prosecution Suit Against Former Tenants Was Properly Denied Contractual Fee Recovery

Narrow Breadth Of The Lease Fee Shifting Provision Sealed The Result.

            The 2/2 DCA in Vaughn v. Darwish, Case Nos. B296693/B305132 (2d Dist., Div. 2 Nov. 12, 2020) (unpublished), did express introductory exasperation about the length of the landlord/tenants’ dispute – going back to 2010, which generated 8 lawsuits, 8 appeals, and 5 writ proceedings.  (When an appellate court starts out this way, it is signaling that the time is drawing near to end the dispute.)  Landlord prevailed in a malicious prosecution action brought in response to an earlier unlawful detainer action by certain tenants, but landlord was denied contractual attorney’s fees—prompting landlord to appeal.

            The fee denial was affirmed.  The reason was that the scope of the fee clause was narrow, applying to these six categories:  recovery of moneys due under the lease; breach of lease covenants; recovery of possession for the leased premises; compelling performance of lease obligations; recovery of damages to the lease property; and enjoining acts contrary to the lease obligations.  A malicious prosecution action did not fall within the ambit of these six categories, such that the denial was correct.  “What is more, the fact that the unlawful detainer actions were the singularity from which this universe of litigation has exploded does not render all subsequent litigation subject to the attorney fees clauses in the leases when that litigation is outside the plain language of those clauses.”  (Slip Op., at p. 29.)

Allocation; Landlord/Tenant: $29,490 In Contractual Fees To Married Residential Tenants Prevailing In Unlawful Detainer Action Was No Abuse of Discretion

Lack Of Hearing Reporter’s Transcript Hampered Review, But Attorney Efforts Benefitting Joint Tenants, Even If Attorney Only Formally Retained By One Tenant, Was Appropriate.

            In Ahdoot v. Chernyavskiy, Case No. B303359 (2d Dist., Div. 2 Nov. 4, 2020) (unpublished), landlord lost an unlawful detainer on summary judgment to two married residents based on a defective notice to quit the premises.  One tenant was in default at the time the eventually successful summary judgment motion was filed, but that default was vacated due to improper service.  An attorney represented one of the tenants although counsel jointly filed a summary judgment to the benefit of both.  Tenants moved for $32,140 in joint contractual attorney’s fees, with the lower court awarding $29,490 after a hearing.  Landlord appealed, although providing no reporter’s transcript of the fee hearing.

            The 2/2 DCA affirmed, rejecting both technical and reasonableness of fees challenges.

            Landlord argued that one tenant’s “defaulted” status inflected the fee award based on the earlier summary grant when the tenant was in default, but the appellate court found that this did not void things and ultimately that tenant righted the situation by getting the default vacated.  Besides, the right course was to attack the summary judgment grant, and landlord never appealed that judgment.  Landlord next contended that it was improper to award fees to tenants jointly when only one tenant was really represented, but that argument was nixed because no legal authority was cited to support the position that a lower court had to parse out legal fees for tenants jointly sued in an unlawful detainer where the attorney’s efforts essentially benefited both of them.  Also, landlord’s failure to provide a hearing transcript made it impossible to show what the lower court did constituted an abuse of discretion.  Finally, it was not unfair to allow fee recovery for the joint tenants given that they were married and beat back an attempt to dispossess them from their residential unit.  As such, no fee substantiation had to parse out efforts as between the two tenants. 

Landlord/Tenant, Substantiation Of Reasonableness Of Fees: $1,586 Fees Award To Landlord Affirmed Based On Inadequate Lack Of Substantiating Evidence

$84,995.25 Was Requested; Only $1,586 In Fees Awarded.

            Although there was no explicit appellate discussion on this issue, Triplett v. Decron Properties Corp., Case No. B295126 (2d Dist., Div. 1 Sept. 24, 2020) (unpublished) is a reminder for parties seeking fee recovery to provide sufficient evidence in support of a substantial request.  The particulars are not reported, but the prevailing party sought $84,995.25 in attorney’s fees and was awarded only $1,586 based on lack of sufficient evidence.  The moral to this one is to make sure there is a competent proof support to your fee motion. 

Landlord/Tenant, Section 1717: Property Tenant Not Signing Lease Modification Properly Denied Fees On Numerous Theories

Civil Code Section, Third-Party Beneficiary, Equitable, And Judicial Estoppel Arguments Did Not Prevail.

            In Onerent, Inc. v. Galanter, Case No. H046916 (6^th Dist. Aug. 11, 2020) (unpublished), an occupant, who thought she was co-tenant, eventually prevailed against a landlord, although the proof showed she never executed lease modifications to make her a true tenant.  Landlord gave up and dismissed without prejudice, although that actually turned into a full-fledged judgment for occupant.  However, occupant sought $11,512.50 in attorney’s fees based on the idea she prevailed under numerous theories, especially prevailing party fee clauses in the lease and the lease modifications.  The lower court denied her request, and the Sixth District affirmed.

            The major problem was that occupant was not a tenant under the lease/modification documents, because she never signed any of them.  Civil Code section 1717 reciprocity principles were not availing, because landlord could not have recovered fees against occupant, so occupant could not do the same.  The third-party beneficiary theory failed because nothing showed she was intended to benefit from the contract, other than incidental references to her in certain documents.  Equitable principles did not dictate otherwise, because the fact of the matter was that she--as a nonsignatory--did not have significant skin in the game and was not alleged to be an alter ego/successor of the actual lease signing tenant. 

            Moral of the story—put your signature on the line and belly up if you want fee entitlement (which, also, means fee exposure).   Otherwise, do not rely on downstream theories on fee entitlement to save the game!

Landlord/Tenant: 1/1 DCA Affirms $243,557 Attorneys Fees And $42,871 Costs Award To Landlord Who Successfully Moved For Judgment Notwithstanding The Verdict Following Tenants Short-Lived Jury Award Of $671,574 In Damages

Much To Tenants’ Dismay, This Case Clearly Demonstrates That A Successful JNOV Can Create A Significant Reversal Of Fortune.

            A San Francisco apartment owner (landlord) served his tenants with an eviction notice, under section 37.9 of the San Francisco Residential Rent Stabilization and Arbitration Ordinance, when he sought to regain possession to allow him and his then-fiancé to move in – later filing an unlawful detainer action against tenants.

            Tenants also filed their own action for wrongful eviction against landlord in Reynolds v. Lau, Case No. A153597 (1^st Dist., Div. 1 August 7, 2020) (unpublished).  Meanwhile, the parties settled the unlawful detainer action – with the settlement including a clause providing that the parties would each bear their own attorney fees and costs.

            More than a year later, the jury found in favor of tenants in their wrongful eviction action and awarded them $223,858 in damages – which were trebled under the rent ordinance resulting in a judgment against landlord in the amount of $671,574.  Tenants’ victory was short-lived, however, as landlord successfully moved for judgment notwithstanding the verdict.  Afterward, landlord moved to recover costs and attorney fees as the prevailing party under the rent ordinance – with the trial court awarding him $42,871 in costs and $243,557 in fees.

            Tenants appealed – arguing the trial court was required but failed to address the financial hardship the fee award would cause them; the trial court failed to deduct fees for time landlord’s counsel spent addressing the tenant harassment claim; and that the trial court failed to reduce the fee award for the amount of time landlord’s counsel spent attending depositions in the unlawful detainer action wherein the parties had settled with an agreement to pay their own fees. 

            The 1/1 DCA disagreed with tenants’ arguments and affirmed.  The trial court was under no obligation to address the financial impact of the fee award on the tenants, and the tenants had failed to raise this argument in opposition to landlord’s fee motion – thereby waiving it on appeal.  There was no abuse in discretion in the trial court’s award as the tenant harassment claim did not play a significant or independent role in the litigation – with only 6 of the 1,396 hours billed by landlord’s counsel for the tenant harassment claim which was based on landlord’s alleged failure to follow requirements for a valid owner move-in eviction under section 37.9, with the principal cause of action in the litigation being the owner move-in eviction.  Finally, as to tenants’ argument re the unlawful detainer depositions, the appellate panel again found no abuse of discretion.  Although the settlement agreement in the UD action provided that each party pay their own fees, the depositions taken in that action were also relevant in the wrongful eviction action.  Therefore, the fees incurred were a necessary litigation expense and recoverable notwithstanding the UD settlement agreement.

Allocation, Landlord/Tenant, Prevailing Party, Reasonableness Of Fees: Prevailing Tenant Was Entitled To Prevailing Party Fees Under Oakland’s Tenant Protection Ordinance Fee-Shifting Provision As Against Defendant Landlord

However, Prevailing Party Properly Awarded Apportioned Fees Of $49,875 Rather Than Requested $318,214 In Fees Against Defendant Landlord; Prevailing Defendant Property Manager Improperly Granted Routine Costs Because Motion Did Not Mention That Defendant And Nothing Showed The Costs Were Incurred.

            In Goins v. Williams, Case Nos. A152828/A153632 (1^st Dist., Div. 3 Apr. 14, 2020) (unpublished), plaintiff tenant won an inhabitability/violation of the Oakland Tenant Protection Ordinance action against defendant landlord (but did not win against defendant property manager), while defeating landlord’s cross-complaint focusing on negligent upkeep of the premises, all happening after a 5-day bench trial.  Plaintiff tenant moved to recoup $318,214 in fees under the Ordinance, which has a unilateral fee-shifting provision in favor of tenants.  Defendant landlord’s attorney moved for $11,615.65 in routine costs but failed to specify whether the motion was filed on behalf of property manager, landlord, or both.  The trial judge denied tenant’s motion to strike costs and awarded property manager $5,810.32.  Everyone appealed, with tenant claiming in a cross-appeal that the fee award was too low.

            The 1/3 DCA affirmed the fee award but vacated the costs award.

            The fee denial was proper because the lower court was within its discretion to do its own apportionment of time based on limited success by tenant on some of her claims after reducing lead attorney’s hourly rate a bit.  However, the lower court erred by awarding costs to property manager because (1) no application for costs was filed by property manager, and (2) nothing showed that any costs were actually incurred by property manager given that two defendants were represented by the same defense counsel (Charton v. Harkey, 247 Cal.App.4^th 730, 744 (2016)) [discussed in our May 24, 2016 post].

Landlord/Tenant: Attorney Fees/Costs Award Of $895,163.42 In Favor Of Prevailing Landlord Affirmed, But $585,383.61 Damages Award Remanded For A Reduced Calculation

Despite Remand For A Recalculation Of Damages, The Fees/Costs Award Was Not So Disproportionate To The Value Of The Legal Services Provided So As To Equate To An Abuse Of Discretion.

            In Alchemy Communications v. Carlsberg Lax Center, Case No. B278068 (2d Dist., Div. 1 December 3, 2019) (unpublished), commercial Landlord and one of its Tenants got into a dispute over fees for electricity. 

            During the first few years of this Tenant’s lease, Landlord was suffering an approximate $30,000 per month deficit in electric bill reimbursements.  An investigation revealed the source to be three outdated, inefficient chillers used to provide cool air for the HVAC system that were not metered.  Tenant exclusively used two of these three chillers for its space and computer equipment.  After Landlord updated the equipment and added meters to the chillers, it sent Tenant a bill for its share of the cost of the improvements, the metered usage for the two chillers used by Tenant, and for an estimation of the electrical costs prior to the installation of the updated equipment and meters.  Tenant refused to pay – claiming Landlord was responsible for the costs of the chillers.  The trial court disagreed – awarding Landlord $585,383.61 in damages, which included estimated electricity fees for 6 months prior to the installation of the meters, and also awarded $895,163.42 in prevailing party fees/costs.

            Tenant appealed both awards.  With respect to the fees for electricity, the 2/1 DCA reversed with instruction to amend the judgment to reduce the amount of damages by the 6 months of estimated electric fees prior to the installation of the meters.  As to the fees/costs, the 2/1 DCA, while noting that there was “room for disagreement with respect to the amount of the award,” found the trial court’s decision did not amount to an abuse of discretion and affirmed.

Landlord/Tenant: Reversal Of Tenant’s Civil Harassment Restraining Order In Landlord/Tenant Dispute Did Not Require Fee Award In Landlord’s Favor

Trial Court Did Not Abuse Its Discretion In Denying Fees Under CCP § 527.6(s).

            In Ewing v. Greenlee, Case No. A155828 (1^st Dist., Div. 3 Aug. 30, 2019) (unpublished), a trial judge denied a discretionary request for a $15,000 attorney’s fees award by the prevailing party in a civil harassment.  Code of Civil Procedure section 527.6(s) specifies that the prevailing party in a civil harassment actions “may” be awarded attorney’s fees.  Earlier, the appellate court had reversed the lower court’s grant of a harassment restraining order because the dispute between the parties concerned disputed property rights, not civil harassment, so the proper forum for its resolution was through an unlawful detainer action.  The 1/3 DCA also affirmed the fee denial order, determining that the harassment request by the non-attorney was not brought in bad faith—a factual call by the trial judge it was unwilling to interfere with. 

Fee Clause Interpretation, Landlord/Tenant: Guarantor Limitation Of Liability Provision Did Not Limit Fee Recovery

Guaranty Limitation Applied Only To Damages, Not To Attorney’s Fees Which Are Costs Instead.

            In Valencia Gateway Retail IV, LLC v. Woltman, Case No. B288726 (2d Dist., Div. 5 Aug. 20, 2019) (unpublished), two defendant guarantors of a breached lease argued that a guaranty liability limitation—“equal to six months’ charges due under the lease” after tenant successfully performed for three years—prevented an award of attorney’s fees against them as non-prevailing parties despite a fees clause in the guaranty stating “[i]f Landlord is required to enforce Guarantor’s obligations by legal proceedings, Guarantor shall pay to Landlord all costs incurred including, without limitation, reasonable attorney’s fees.”  The trial court did not buy the argument, awarding prevailing landlord $30,365.000 in fees under the guaranty fees clause.

            The 2/5 DCA affirmed the fee recovery.  It, too, did not believe that the guaranty limitation applied to fees because the guaranty fees clause was not so limiting, and the limitation only applied to damages rather than costs such as attorney’s fees.

Section 998: When Offeree Beats First Offer, Court Refuses To Freeze Offeree's Costs At Time Of First Offer When Offeror Makes Second Offer

Court Could Not Find Case On Point,  So It Was Guided By Statutory Purpose Of Section 998.

        In Hersey v. Vopava, B287896 (2nd Dist. Div. 8 Aug. 14, 2019) (Stratton, Grimes, Wiley), the Court holds, "where an offeree achieves a judgment more favorable than a first offer, the determination of whether an offeree obtained a judgment more favorable than a second offer should include all costs reasonably incurred up to the date of the second offer."

        The background was a landlord-tenant dispute between tenant Hersey and landlord Vopava. The landlord made a $10,000 section 998 offer, followed by a $20,001 offer right before trial. The tenant rejected both offers, went to trial, and recovered $7,438. Concluding that the landlord's offers were reasonable and in good faith, and that the landlord's offer was better than the tenant's recovery, the Court awarded post-initial offer costs, which included attorney's fees, and amounted to $30,483.55. The tenant appealed.

        The trial court erred by not taking tenant's pre-first offer costs into consideration, which when added to the damages award, added up to $12,369.75, beating the landlord's initial $10,000 offer. And because the trial court failed to take into account costs that the tenant incurred between the time of the initial offer, and the time of the second offer, a remand is necessary to determine if the second offer of $20,001 was reasonable and in good faith.

        COMMENT: The Court explained that, while it could not find the same fact pattern in another case, its decision was guided by the principle that "the appropriate analytic framework for all multiple offer scenarios is to determine which rule will effectuate the statutory purposes of section 998." And it concluded that, "[i]t would not further the purpose of section 998, or be consistent with its statutory implementation to punish an offeree who beats an offeror's first offer by freezing her costs at the date of that low first offer."

        So now the trial court needs to determine whether the tenant beat the second offer. However, even if the tenant does not beat the second offer, the landlord's recovery will be limited to fees and costs incurred after the second offer --a  recovery that would include the fees and costs incurred in trial.

Landlord/Tenant, Section 998, Special Fee Shifting Statute: In Two Related Opinions, 1/2 DCA Explores San Francisco Eviction Ordinance Fee-Shifting Provision, Determining Owners Were Properly Awarded Attorney’s Fees Against Two Tenants

In One Case, Section 998 Offer Was Not Beat Even Though Two Plaintiff Tenants Did Get Positive Damages Under The San Francisco Residential Rent Stabilization And Arbitration Ordinance.

            The 1/2 DCA in two opinions, Pitre v. Lam and Wong, Case No. A151061 (1^st Dist., Div. 2 Aug. 7, 2019) (unpublished) and Randt v. Lam, Case No. A151062 (1^st Dist., Div. 2 Aug. 7, 2019) (unpublished), faced an appeal from two tenants after the trial judge awarded apartment owners attorney’s fees under a specific provision of the San Francisco Residential Rent Stabilization and Arbitration Ordinance (Rent Ordinance).  The appellate court affirmed the fee awards.

            In Pitre, one of the plaintiff tenants rejected a CCP § 998 offer for $50,000, including waiver of unknown claims arising from the theories in his complaint, but only recovered $32,250 from apartment owners after a jury trial.  The complaint was predicated on the theory that owners interfered with tenant’s right to quiet use and enjoyment by unlawfully evicting him through an improper relative move-in.  The trial judge awarded tenant pre-offer fees of $5,857.19, as well as awarding owners $47,564 in post-offer attorney’s fees under a fee-shifting provision of the Rent Ordinance.  Tenant appealed, but the fee award remained intact.  First of all, the section 998 offer was valid because requesting waiver of derivative claims relating to the theories in the complaint was proper (Ignacio v. Caracciolo, 2 Cal.App.5^th 81, 84, 89-90 (2016)), and the offer was made deep enough in the case such that the tenant had enough information to reasonably evaluate it.  Second, tenant’s theory was grounded in a section of the Rent Ordinance having a bilateral fee provision allowing fee recovery by a prevailing defendant, such that it was distinct from fee recovery under another Rent Ordinance provision which was unilateral in favor of only a prevailing plaintiff.  This was not a situation where the defense prevailed on claims which were intertwined with unilateral attorney’s fees provisions, where fee recovery is not allowed.  (Compare with Turner v. Association of American Medical Colleges, 193 Cal.App.4^th 1047, 1071 (2011); Carver v. Chevron U.S.A., Inc., 119 Cal.App.4^th 498, 504 (2004); Wood v. Santa Monica Escrow Co., 151 Cal.App.4^th 1186, 1191 (2007).)

            Randt involved a suit against the same apartment owners by a tenant who was defensed (finding tenant was evicted in good faith), which prompted the lower court to award owners $51,318 in attorney’s fees under the Rent Ordinance provision at issue in Pitre and $19,279 in costs.  Those awards, too, stood on appeal.  The parties’ discussion of a CCP § 998 offer was puzzling to the appellate court, because owners outright prevailed so as to be entitled to fees and costs based on the Rent Stabilization provision given that tenant’s theory arose under a section where there was a bilateral fee-shifting provision. 

Landlord-Tenant, Reasonableness Of Fees, Section 1717: $428,175 Fee Award To Winning Landlord In Tort Condo Damages/Fraud Case Against Tenants Affirmed On Appeal

Residential Security Deposit Scheme Did Not Preempt Tort Fee Award; But Landlord Correctly Reduced Landlord’s Fee Request Of $659,367.56 For Various Reasons

            Los Angeles County Superior Court Judge Weingart, sitting by assignment on the 2/1 DCA, has penned a nice decision in Sweeney v. Scully, Case No. B284915 (2d Dist., Div. 1 June 27, 2019) (unpublished) where a landlord won tort damages against a tenant for condominium damages, but was granted a scaled-back fee award based on inefficiencies, duplication, and block billing.

            In this one, tenants sued for return of a $60,000 security deposit for renting a luxury oceanfront condominium, with landlord cross-claiming for tort damages relating to misrepresentations about past tenancies and use of a so-called service dog.  Landlord prevailed, awarded $287,581.75 in construction, loss-of-use, moving/storage, and furnishings damages by a jury.  Landlord then moved for contractual attorney’s fees of $659,367.56, but the lower court awarded $428,175.  This prompted an appeal by both sides, with the award affirmed on appeal.

            Tenant principally argued that Civil Code section 1950.5, the residential landlord security deposit scheme, preempted any tort claim award in landlord’s favor.  The appellate court disagreed, determining that nothing in the security deposit statutory language barred tort claims or provided an exclusive measure of damages for any dispute after a lease terminates.

The tort claims did give rise to fee entitlement under a broadly-worded lease fees provision.

            That brought the 2/1 DCA to landlord’s appeal for more fees than awarded by the lower court.  The problem here was that the record indeed showed the following:  (1) inefficiencies in the form of two partners at trial and even the jury complaining about the excessively slow examinations by landlords’ attorneys at trial (Rey v. Madera Unified School Dist., 203 Cal.App.4^th 1223, 1244 (2012)) ; (2) tenants’ counsel expended 890 hours versus landlord’s counsel’s 1,300 billable hours, with the comparative analysis of each side’s litigation costs being a check on the reasonableness of a fee request (Donahue v. Donahue, 182 Cal.App.4^th 259, 272 (2010)); and (3) reduction for  blockbilled fee submissions which had the effect of making it difficult to determine fee compensability of certain entries (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 695 (2016); Christian Research Institute v. Alnor, 165 Cal.App.4^th 1315, 1320, 1325 (2008)).  So, the lower court’s reductions were no abuse of discretion.

Landlord/Tenant: $2,503,141 Fee Award To San Francisco Under Rent Ordinance And Health & Safety Fee Provisions Affirmed On Appeal

Fee Entitlement Bases Existed, And Amount Of Fee Award Was Not Erroneous.

            Health and Safety Code section 17980.7(b)(1) has a mandatory fees and actual costs provision to be applied for State Housing Law violations where the lower court finds a building substantially endangers residents’ health and safety.  San Francisco has a Rent Ordinance (Adm. Code, § 37.10B(c)(5)) containing a mandatory fees and costs provision triggered upon a finding of tenant harassment.  Both of these fee entitlement bases were at issue in City & County of San Francisco v. Kihagi, Case No. A152933 (1^st Dist., Div. 1 June 13, 2019) (unpublished).

            What happened was that appellant landlords were successfully sued by City and County of San Francisco (City) for illegally harassing their tenants and violating state/local building and housing laws.  City sought its attorney’s fees to the tune of $2,606,741 based on the Health and Safety Code and Rent Ordinance provisions discussed above.  The trial judge eventually awarded $2,503,141 after reducing the hourly rates of one of the deputy attorneys and reducing also for some duplication.  (Costs of $201,279.75 out of a requested $234,135.54 were also awarded, an award not challenged on appeal.)

            Landlords’ appeal of the fee award was not disturbed at all.  Fee entitlement solidly was established under state statute and the local ordinance, with actual expenses meaning what it said—attorney’s fees were pegged to the lodestar market approach, not something different (such as lower rates charged by private attorneys practicing in the municipal law sector or “internalized” governmental costs).  With respect to the amount of fees awarded, the attorney submissions were detailed enough such that detailed billings were unnecessary under the circumstances.  The fact that public employee counsel rates were lower did not detract from the fact the lodestar market approach should prevail, especially given the hourly rates claimed were well below market anyway. 

Fees as 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.

Landlord/Tenant, Section 998, POOF!: Landlord And Tenant, In Lengthy Litigation Over Personal Property In A Westlake Village Luxury Home, Lose Both Their Attorney’s Fees Awards On Appeal

After Ten Years Of Litigation, Tenant Only Received A $56,000 Net Recovery—Not Exactly A Win When All Of The Attorney Efforts Are Considered!

            Christie v. Ridge, Case No. B259189 (2d Dist., Div. 6 February 6, 2019) (unpublished), although unpublished, is a nice reminder of how costly litigation is and how both litigants winning attorney’s fees can see it go away where there is no fee entitlement or a CCP § 998 offer is deemed invalid by the reviewing court.

            The underlying dispute was a brouhaha about the disposition of personal property left by a tenant after a landlord evicted tenant from a luxury home in Westlake Village. (The personal property was valued at $4 million, nice by our standards—we don’t have personal property of this nature.) After 7-10 years of litigation, tenant prevailed on negligence/conversions claims, and landlord prevailed on a breach of contract cross-claim. That resulted in dueling fee requests, producing fee awards in favor of each. The trial judge awarded $220,000 in fees to tenant and $533,225 in fees to landlord (with the fees to landlord stemming from rejection of certain CCP § 998 offers). Everything was appealed.

            Even after procedural dismissals, this appeal was “sour grapes” for both sides. The fee awards went POOF! and tenant only had a meager $56,000 net recovery after 10 years of litigation even though the trial judge originally found differently on net recovery. But, since we are a fee blog, we focus on the fee reversals.

            So, for tenant, the $220,00 fee award went away because no attorney’s fees are recoverable on a conversion claim. (Haines v. Parra, 193 Cal.App.3d 1553, 1559 (1987).) Although tenant argued that it was seeking fees under a claim brought under Civil Code section 1965(e)(3) (which does allow discretionary fees to a prevailing party in a case where a landlord wrongfully retains personal property), the problem here is that the judgment was not entered on this claim, but only on the conversion claim carrying no fee exposure. So, reversed.

            For landlord, the problem was that the landlord group’s section 998 offer was invalid. It conditioned the offer on a release of claims which were not part of the lawsuit, because the parties had 10 other litigations at issue elsewhere—an overbroad release which cannot be sustained under section 998.   So, reversed also. (BLOG OBSERVATION—The 2/6 DCA did suggest that Civil Code section 1542 waivers of known and unknown claims, even just related to the claims in the lawsuit, could be problematical language if not drafted with precision—so, beware when fashioning 998 offers!)

Consumer Statutes, Landlord-Tenant, Section 1717: Tenant Prevailing On Common Law Residential Inhabitability Claim Limited To Contractually-Capped Fees Of $1,600

Although More Fees Potentially Allowable Under Statutory Inhabitability Claim, Jury Did Not Base Its Verdict On The Statute Such That Contractually Capped Amount Was The Proper Award.

            This next case involves an intersection between the parties’ contractually capped fee recovery under lease agreements and potentially more expansive damages under a statute allowing recovery for a tenant if that tenant recovers under the statute (Civil Code section 1942.4(b)(2), which specifies recovery for a prevailing tenant if the elements of the statute are met).

            What happened in Brookshire v. HPG Management Inc., Case No. B269544 (2d Dist., Div. 1 Oct. 25, 2018) (unpublished) was that tenant prevailed on a common law implied warranty of habitability claim against landlord under four leases. Each lease did allow fee recovery to a prevailing party, but capped recovery at $400 per lease. Tenant moved to recoup $146,670 in attorney’s fees under both the lease fees clause and Civil Code section 1942.4(b)(2). The lower court determined that plaintiff was entitled to contractual fees, but only $1,600 ($400 under the four leases) and was not entitled to fees under the statutory implied warranty of habitability claim because the jury did not render findings under the statute (instead awarding recovery under the different, but somewhat related, common law implied warranty claim).

            The fee award was affirmed on appeal.

            On the lease fee clauses, there was nothing wrong with the cap because the limits applied to all parties equally.   The appellate court relied greatly on the reasoning in 511 S. Park View, Inc. v. Tsantis, 240 Cal.App.4^th Supp. 44, 48 (2015) [reported in our October 10, 2015 post], which did sustain a similar contractual cap on fees. There was nothing “one sided” about such a cap given that it applied to all parties.

            With respect to the claim for greater fees under the statutory claim, the problem here was that the jury only awarded recovery under a common law implied warranty claim with much different elements than the statutory claim. Given this reality, no greater fees were justified under Civil Code section 1942.4.

Allocation, Landlord-Tenant, Special Fee Shifting Statute: Defendant Alleged To Be Partner Of Landlord Properly Awarded Fees Of $45,930 Against Tenant, Minus A “Double Dip” Item

One Unilateral San Francisco Ordinance Fee-Shifting Provision Did Not Show That Interrelated Fees Spent On Compensable Claims Could Not Be Allowed.

            Bienkowski v. Lam, Case No. A151579 (1^st Dist., Div. 5 Aug. 9, 2018) (unpublished) was a situation where a tenant sued a defendant as the undisclosed partner of landlord, alleging that he was subject to the rental of uninhabitable, illegal dwelling units prohibitions. Plaintiff lost against landlord, who then sought fees under several fee-shifting statutes—namely, Civil Code section 1717 (contractual fees clause, made mutual no matter how worded), Civil Code section 1942.4 (prevailing party entitled to fees for untenable dwelling collection of rent situation), and San Francisco ordinance (one of which had bilateral fee provision for uninhabitable situations and one of which had an unilateral prevailing plaintiff provision for tenant harassment). Successful defendant was awarded $455,938 in attorney’s fees under these various provisions.

            For the most part, the fee award was affirmed—except for a $2,000 “double dip” reduction.

            Here is what the appellate court determined: (1) Defendant Lam did prevail under the partnership theory so that he was entitled to a fee recovery; (2) the San Francisco ordinance has a bilateral fee provision such that Lam prevailed as the successful “owner” under the fee provision; (3) the San Francisco’s unilateral fee language relating to tenant harassment did not override the general principle that intertwined work relating to compensable claims do not have be allocated out given no indication that the unilateral fee language was preemptive in nature; (4) no allocation had to be made because the non-compensable work claims were interrelated; and (5) the fee award had to be reduced by $2,000 because the original and supplemental motion papers demonstrated it had been counted twice for fee request purposes.

Landlord/Tenant: Tenant’s Dismissal Without Prejudice On Eve Of Trial Justified $19,200 Fee Award To Landlord/Landlord’s Agent Under San Francisco Municipal Statute And Civil Code Inhabitability Fee-Shifting Provisions

Lease Fees Provision Saying Everyone Bears Their Own Fees Did Not Preempt Statutory Fee Entitlement Provisions.

            In Gupta v. Choy, Case No. A151582 (1^st Dist., Div. 1 June 27, 2018) (unpublished), plaintiff tenant dismissed a case without prejudice against defendants, either landlords or at least their agents, on the eve of trial. Defendants brought a motion for attorney’s fees under a San Francisco Rent Ordinance and Civil Code section 1942.4, which both have fee-shifting provisions. Although asking for $25,250, the dismissed defendants garnered a fee award of $19,200.

            Plaintiff’s appeal of the fee award did not result in any change.

            The San Francisco Ordinance did apply to agents, representatives or successors of the landlord, such that defendants indeed were prevailing parties. However, even though Civil Code section 1942.4 did not clearly encompass agency relationships within the landlord definition, the appellate court found plaintiff was bound by binding complaint admissions that defendants were landlords.

            The appellate court determined that defendants were prevailing parties on a practical level; they wanted a defense judgment and obtained that through the dismissal. (Salehi v. Surfside III Condominium Owners Assn., 200 Cal.App.4^th 1146, 1156 (2011); Intelligent Investments Corp. v. Gonzalez, 1 Cal.App.5^th Supp. 1, 8-9 (2016).)

            The 1/1 DCA panel rejected the argument that the lease agreement saying everyone would bear their own fees somehow took precedence over the statutory provisions providing fee entitlement.

            The amount of the fee award was no abuse of discretion, with work claimed interrelated among compensable fee claims and with attorneys being able to claim market rate fees even though they billed their clients less. (Chacon v. Litke, 181 Cal.App.4^th 1234, 1260 (2010).)

Landlord/Tenant/Prevailing Party: Fees Award To Plaintiff Where Both Parties Gained Some Relief Reversed Because Trial Court Erroneously Applied Wrong Standard

Lower Court Used CCP § 1032, Rather Than Civil Code § 1717, For Purposes Of Determining The Prevailing Party.

            8121 Van Nuys Associates, Inc. v. Hoffman, Case No. B276900 (2d Dist., Div. 4 March 21, 2018) (unpublished) involved a landlord/tenant case where both parties won some relief.  Landlord won past rent/damages, while tenant won a security deposit award, resulting in a net judgment in favor of landlord.  Both sides moved for fees, with landlord requesting $43,123.60 and tenant requesting $233,949.   The trial court then determined that landlord was the prevailing party under a lease fees clause, awarding it $42,513.62.  It reasoned that landlord was the prevailing party based under CCP § 1032 because it received a positive net judgment.

            The 2/4 DCA reversed and remanded.  The flaw in the lower court’s analysis was that CCP § 1032 does not determine which side prevailed in this context; rather, Civil Code section 1717 governs.  (Zintel Holdings, LLC v. McLean, 209 Cal.App.4^th 431, 438 (2012).)  Because discretion was not exercised under section 1717, a remand was appropriate.  However, the appellate court somewhat provided some guidance on remand by observing landlord had claimed damages of about $61,000 (out of a request exceeding $1 million), while tenant obtained its security deposit request—such that both sides obtained some success.  But, in the end, the lower court had to exercise discretion under section 1717 for purposes of determining the prevailing party.

Landlord/Tenant: Appellate Court Trims Successful Landlord’s Fee Award From $113,096.33 To $49,912.83

Cross-Complaint Defense Work Involving Pre-Fees Clause Conduct Primarily Cut By 1/3 DCA.

            In a long-standing commercial tenancy dispute producing an earlier appellate opinion reversing a SLAPP motion, a former landlord (plaintiff and cross-defendant) finally prevailed against tenant when the trial judge after a bench trial awarded landlord $85,000 in back rent plus prejudgment interest after tenant dismissed her cross-complaint.  Then, the trial judge awarded total attorney’s fees of $113,096.33 out of a requested $118,096.33 pursuant to a contractual fees clause.

            After affirming the merits of the judgment in a published portion of the opinion, the 1/3 DCA in Hong Sang Market, Inc. v. Peng, Case Nos. A140653/A141640 (1^st Dist., Div. 3 Feb. 13, 2018) (fee discussion unpublished) trimmed the fee award to landlord downward to $49,812.83.

            The reason for the “trim” primarily was that the work on the defense of tenant’s cross-complaint involved conduct which predated the operative fees clause.

            BLOG OBSERVATION—In the published portion of the opinion, there is a good discussion about res judicata effect of a prior unlawful detainer judgment with respect to a subsequent long-cause action to collect back rent. 

Landlord/Tenant; Lodestar; Special Fee Shifting Statute: Two Fee Orders Reversed On Appeal

Trial Judge Failed To Honor Voluntary Dismissal By Plaintiffs In Awarding Fees To Defense, While Lower Court Failed To Utilize Lodestar Methodology In Awarding Reduced Fees To Plaintiffs Under Settlement Agreement.

            Duncan v. Nathan, Case No. A147468 (1^st Dist., Div. 5 Feb. 5, 2018) (unpublished) involved a landlord-tenant dispute involving claims for negligence, quiet enjoyment breach, San Francisco rent ordinance violations, constructive eviction, and intentional infliction of emotion distress by tenants against landlord/affiliates.  On the eve of trial, plaintiffs settled with the real landlord for $12,500 each, with a reservation of the fees issue for the trial judge to decide later.  Against defendant landlord manager, the jury awarded $2,153.03 against manager on the negligent claim, but found for her on the remaining claims which survived a nonsuit motion (with the jury finding for the defense on the statutory ordinance eviction claim asserted by plaintiffs).  Subsequently, the lower court awarded the defense the entirety of her requested fees based on a fee-shifting provision in the San Francisco ordinance, and awarded plaintiffs $3,750 in fees each (much reduced from the almost $142,000 lodestar request plus a 1.35 positive multiplier) based on the settlement stipulation fee reservation clause.

            Plaintiffs appealed both fee awards, prevailing on both challenges on appeal.

            With respect to the fee award in favor of the defense, the appellate court determined that the trial judge erred in not granting plaintiffs’ request for a voluntary dismissal of the San Francisco ordinance eviction claim, although it did remand for a look at whether there was another ground for fee entitlement.

            On plaintiffs’ appeal of the reduced fee awards (about 30% of the $12,000 settlement), the appellate court found that the lower court had failed to follow the lodestar methodology in determining the amounts of fees to be awarded, instead focusing on the financial condition of the nominal landlord (meager) and plaintiffs (who appeared to be well heeled).  Given the failure to follow the correct methodology, the matter was reversed to use the correct test, factoring in the results obtained against landlord, any unnecessary or excessive litigation, and time spent litigating claims against the landlord manager. 

            BLOG OBSERVATION—The appellate court did not discuss whether financial condition was a relevant consideration under Civil Code section 1717.  There is a split of thinking on this issue, as we discussed in our April 13, 2016 post of a Sixth District unpublished decision, McNeil v. Symmetricom, Inc.

Landlord/Tenant/Section 1717: Sublessor Losing Unlawful Detainer Case Awarded Civil Code Section 1717 Fees Of $1,334,368.30 And Costs Of $4,637.03

Case Was Extensively Litigated, Justifying This Level Of Fee Recovery.

 

           Home Depot.  2003.  Santa Fe, New Mexico.  John Margolies, photographer.  Library of Congress.

        In First City Pacific, Inc. v. Home Depot U.S.A., Inc., Case No. B268604 (2d Dist., Div. 7 Dec. 19, 2017) (unpublished), sublessor (tenant to a ground lease) lost an unlawful detainer action to sublessee Home Depot when a jury determined that the notice to pay/quit was not a reasonable estimate of what was owed by Home Deposit.  The trial judge then awarded Home Depot $1,334,368.30 in fees and $4,637.03 in costs based on a fees clause in the sublease.

            The 2/7 DCA affirmed.  Sublessor argued that Home Depot did not prevail, but the appellate court determined it did get an unqualified win on the sole contractual claim involved in the unlawful detainer action (which triggered Civil Code section 1717 fee entitlement).   With respect to whether discretion was abused by the large fee award, the panel believed that it was justified because the case was extensively litigated and the lease reimbursement issue was complex—warranting two partners billing over two thirds of the 3,647.6 hours for which fees were requested. 

Landlord/Tenant and Section 1717: Lack Of Written Contract Fees Clause Doomed Attorney’s Fees Request

Tenant’s Probability Theory Did Not Do Well At Either Trial Or Appellate Levels.

Ida B. Wells Housing Project.  Meeting of the tenants.  Chicago, Illinois.  April 1942.  Jack Delano, photographer.  Library of Congress.

            In Doll v. Ghaffari, Case No. B272384 (2d Dist., Div. 4 Oct. 25, 2017) (unpublished), tenant did prevail against landlord on certain subletting disputes (two unlawful detainer actions and a subsequent tenant civil action), with tenant gaining some substantial compensatory damages after some appeals.   Although clearly a prevailing party, tenant moved for attorney’s fees of $308,649 under the contractual claims which survived all of the prior trial/appellate court proceedings.  The trial judge awarded nothing.

            Tenant did no better on appeal.  The main flaw was tenant’s failure to produce a contract with a fees clause.  Instead, tenant relied on subsidiary “custom and practice” proof asserting that it was standard practice for residential areas in the venue to contain fees clauses, further bolstered by probability theory that 90% of the leases overall in the lease venue contained these clauses.  Neither the trial nor appellate court bought this somewhat mathematically-oriented argument.  Given that there was no evidence of the “data base” of leases involved, the probability argument was viewed as sheer speculation.  Tenant argued that landlord’s check of a box for fees in an unsuccessful eviction action estopped landlord from denying fees were recovered, but this did not work because (1) landlord did not prevail so as to invoke judicial estoppel, and (2) the trial court credited that landlord had mistakenly checked a box claiming fees when there was no entitlement to them.

            BLOG FAVORITE PART OF DECISION—Tenant’s attorney “argued there are four rules in every residential lease:  ‘You can’t have a dog; you can’t have a cat; you are not getting your deposit back; and if you get in a fight with your landlord, you’re paying its attorney fees.’  The [lower] court replied that for ‘every one of those statements, I’ve seen the opposite.’”

Landlord/Tenant, Prevailing Party, Section 998: $324,533.50 Fee Award To Landlord Affirmed In Second Coercive Declaratory Relief Lawsuit Against Tenant

Dispute Focused On Tenant’s Ability To Use Common Areas Behind Lease Premises.

            Landlord/tenant disputes can be expensive from fee expense and fee award perspectives, as Muzzi v. Bel Air Mart, Case No. C073684 (3d Dist. July 3, 2017) (unpublished) demonstrates.

           In this one, landlord had to bring a “coercive” declaratory relief action against a commercial tenant based on winning a prior action in which tenant was only allowed to use common areas behind its store for loading/unloading purposes only. Tenant perceived it could stage storage of equipment for many hours, with landlord then pursuing the second action. The jury found a trespass but found no harm, with the parties stipulating to a later $1.00 in nominal damages, and the trial judge subsequently entered a permanent injunction to enjoin tenant conduct other than loading/unloading activities. Landlord had turned down a small $1,500 CCP § 998 offer. Later, the trial judge awarded landlord $324,533.50 in attorney’s fees as the prevailing party under Civil Code section 1717 (based on a broadly-worded contractual fees clause).

            The Third District affirmed.

        Landlord was the prevailing party given the trespass and permanent injunction wins (especially the permanent injunction win to enforce the earlier victory), especially in light of the fact that the lease clause allowed for recovery relating to any “remedy in connection with” the lease.

        With respect to tenant’s suggestion it was the winner based on the 998 offer, the appellate court agreed with the landlord and trial court: it was invalid based on ambiguity. The offer contained language about “storage,” but that was too amorphous given that tenant really wanted “staging” of operational equipment for hours on end.

Landlord/Tenant; Reasonableness Of Fees: Tenant Recovering $78,753 In Damages Under Statutory Landlord-Tenant Provisions Properly Awarded Attorney’s Fees Of $91,344.50 As Prevailing Party

 

 

Facts Were Interesting, But Fee Award Was Not Shocking In Nature.

 

 

Landlord (Mr. Timothy Rack Rent) telling tenant leasehold (a country attorney) that rent is being raised. Circa 1750-1795. John Spilsbury, engraver. Library of Congress.

 

    We will have to say that after blogging for close to nine years, the attorney's fees decisions frequently mirror the angst parties have in litigating the merits. Put another way, the fee dispute is a "carryover" of the angst from the merits decision, although in many occasions the merits victor recovers a substantial portion of requested attorney's fees and costs. The next decision well illustrates our general observation over the years.

 

    In Carlson v. Corona, Case Nos. B264709/B267343 (2d Dist., Div. 4 Feb. 24, 2017) (unpublished), a girlfriend—who was the executor of her deceased boyfriend's estate—sold an apartment building of which she was a tenant and agreed to move from one apartment unit to a smaller unit as part of the overall sale. However, the new owner/new landlord did not allow her time to fetch all of her possessions from the former apartment unit given that the sale escrow was short in nature. Given this possession issue, girlfriend, as plaintiff, sued new owner/landlord, as defendant, under various landlord-tenant statutory provisions relating to the personal possession issues. Plaintiff won, recovering $78,753 in damages. The trial court then awarded her $91,344.50 (the full request) in attorney's fees under fee-shifting provisions contained in Civil Code sections 789.3 [fees for removing residential tenant's personal property without permission or without following statutory procedures] and 1965 [failure to return residential tenant's personal property upon written request].

 

    Landlord's principal challenge was that the fee award was excessive, eight times more than the damages award. The problem here was that the correct damages award was $78,753, with the eventual $91,344.50 fee award not shocking when the proper compensatory number was used. Fee recovery affirmed.