CALIFORNIA ATTORNEY'S FEES

Consumer Statutes/Deeds Of Trust: Where Borrower Was Granted Erroneous TRO Under Homeowner Bill Of Rights, $14,000 Fee Award Under Bill Of Rights Went POOF!

 

Predicate for Fee Entitlement Evaporated.

     In our June 14, 2015 post, we discussed the Third District’s decision in Monterossa v. Superior Court, 237 Cal.App.4^th 747, 754 (2015), which decided that attorney’s fees were properly awarded to a borrower obtaining a preliminary injunction against lender “dual tracking” under Civil Code section 2924.12(i) (the Homeowner Bill of Rights fee-shifting statute effective January 1, 2013). Monterossa’s reasoning recently was extended to allow a fee award to a borrower obtaining a temporary restraining order (TRO) under the Homeowner Bill of Rights. (See Lac v. Nationstar Mortgage LLC, 2016 U.S. Dist. LEXIS 40633 at *10 (E.D. Cal. March 28, 2016).)

     Borrower in Zadovsky v. Wells Fargo Bank, N.A., Case No. A140939 (1^st Dist., Div. 3 Apr. 20, 2016) (unpublished) won a TRO for lender “dual tracking,” but lost a preliminary injunction battle because the lower court determined that the property was not owner-occupied so as to be ineligible for Homeowner Bill of Rights protections. However, in the TRO order, borrower was awarded attorney’s fees of $14,219 for the TRO win under the Bills of Right fee-shifting statute.

     The fee award went POOF! on appeal because nothing in the TRO, either, established borrower’s relevant property was owner-occupied such that the TRO was issued in error. Based on this, the attorney’s fees award evaporated also. (Borrower argued the appeal was moot because the property had been sold such that the appeal was moot, with the appellate court agreeing with respect to the TRO merits but disagreeing with respect to the fee exposure still faced by lender under the fee component of the TRO—with this latter aspect allowing for scrutiny of the propriety of issuing a TRO in the first place.)

Appealability/POOF!/Special Fee Shifting Statute: Reversal Of Penal Code Section 496(c) Verdict Means $1.15 Million Fee And Costs Award Went POOF!

 

Postjudgment Fees Also Reversed, But Expert Witness Fees Sustained Based On Failure To Separate Appeal The Postjudgment Award.

    In Kayne v. Mense, Case No. B254975 (2d Dist., Div. 1 Mar. 25, 2016) (unpublished), defendants were found to have breached a fiduciary duty to plaintiff (giving rise to compensatory and punitive damages) and found to have violated Penal Code section 496(a)—a stolen goods provision--by embezzling money owed plaintiff under a contract with a $750,000 fabric advance.  Because Penal Code section 496(c) allows for treble damages, attorney’s fees, and costs, the trial judge later awarded $1.15 million in fees and costs to plaintiff.  (The judgment for plaintiff included about $3 million for compensatory damages and civil penalties and $750,000 in punitive damages, which did not include the costs and attorney’s fees award, derived from a jury verdict.)  The trial judge also awarded $114,055.50 in postjudgment fees under CCP § 685.040 based on bankruptcy work against defendants resulting in the dismissal of their bankruptcy petitions.

    On appeal, the compensatory/treble damages award and fees award under Penal Code section 496 went POOF! based on the determination that this provision did not apply to an ordinary contractual dispute arising in the course of an ongoing, legitimate business relationship between the parties.  The 496 determination on review also eliminated entitlement to the $114,055.50 fee award under § 685.040.  Finally, because the defense did not separately appeal a post-trial expert witness fee award of a discretionary nature, plaintiff retained this award because the appellate court lacked jurisdiction to review it.

Employment: PAGA Fee Award Against Individual Defendants To The Tune Of $456,522.20 Reversed On Appeal

 

Failure To Mention PAGA Fee Entitlement, Much Less Segregate Fees, Resulted In Overturn.

     This next post is an ouch!

     In Makabi v. Gedalia, Case No. B261005 (2d Dist., Div. 1 Mar. 2, 2016) (unpublished), plaintiff employees sued two defendant employers for a host of Labor Code wage/hour violations and four plaintiffs sued two individual defendants (who owned employers) for PAGA claims. In the end, the trial judge found in favor of the seven plaintiffs, by and large, but did not award PAGA civil penalties (but did find PAGA liability against the individual defendants). Plaintiffs sought fee recovery under Labor Code sections 226 and 1194 (itemization/wage-hour provisions), but not expressly under Labor Code section 2699 (PAGA fee-shifting provision). The lower court nevertheless awarded $456,522.20 against all defendants (including the individual defendants), jointly and severally, out of a requested $570,653.13 in fees.

    The individual defendants appealed, and it was a good thing they did. They gained a reversal of the fees. The reason was they were not named in the Labor Code claims involving itemization and wage-hour claims, which would have led to fee recovery. Instead, they were only sued under the PAGA claim, and here is the kicker—plaintiffs never sought fee entitlement in the notice of motion and motion under the PAGA fee-shifting provision much less attempted to segregate fee recovery against individual defendants solely against the PAGA claim. That meant the fee recovery had to be deleted as to the individual defendants. Ouch, again.

Fee Clause Interpretation/POOF!: Nonprevailing Cross-Complainant Appealed $4.2 Million Fee Recovery In Case Producing Somewhat Split Results

 

…. Smart Move – Fee Award Entombed On Appeal.

Tomb of General Ulysses S. Grant, Riverside Drive, NYC.  1897.  Library of Congress.

     In U.S. Grant Hotel Ventures, LLC v. American Property Management Corp., Case No. D066490 (4^th Dist., Div. 1 Feb. 19, 2016) (unpublished), parties got into a hotel management imbroglio where plaintiff sued defendants, and one defendant brought a cross-complaint in a back-and-forth matter, even in two prior appellate decisions, resulting “kinda” in a mixed decision. “Kinda” is the operative word. Plaintiff won a $1.35 million verdict on a contractual breach, fiduciary breach and conversion counts, while cross-complainant/defendant won $3.2 million (after a post-trial remittitur) on wrongful fee termination/failure to pay damages and liquidated damages claims.

     Now, here is the part we blog on. Both sides moved for attorney’s fees recovery, and both sides won. Cross-complainant won $3.35 million in fee recovery under Civil Code section 1717 based upon a fees clause in a Managing Agreement on its cross-complaint, while plaintiff on its complaint was awarded $4.2 million under the Operating Agreement based on a fees clause against the defense (with CCP § 1021 being the operative provision which allows fee recovery based on the bargain between the parties). “Kinda, kinda” again a split, although we would note something that is interesting (but not likely surprising to attorneys or judges)—the fee recovery in both disputes still exceeded the merits dispute recovery by both sides in the overall controversy.

     However, interesting enough, defendant/cross-complainant appealed the fee recovery to plaintiff on the complaint. That was a good move.

     The entire $4.2 million fee award went POOF! even though the Operating Agreement fees clause was broad enough to allow for recovery on tort claims. The rub was that plaintiff was not a party to the Operating Agreement, no provisions in the Agreement showed it a party to the contract, no Corporations Code statutes allowed for independent fee recovery apart from the Operating Agreement, and there were no basis for recovery on a third-party beneficiary theory. So, the end result—if our math is right—was that plaintiff was much, much unhappier after the appellate decision: before the decision, it was only $1 million in the minus to the cross-complainant when the merits judgment and fee award were totaled; but afterwards, plaintiff was $5.2 million behind when its fee award went POOF!

Arbitration/Ethics/POOF!: $1.3 Million Judgment Based On Arbitration Award Goes Away Because Former Attorneys Violated CRPC Rule 3-310

 

Trial Court Approved Arbitration Award Involving Contract Against Public Policy, So Remanded To Determine When Actual Conflict Arose.

     Everyone thinks that there is little hope of appealing arbitration awards. However, that is not true where the underlying claim rests on a contract which is illegal or against public policy.

     A client’s former attorneys in Sheppard, Mullin v. J-M Mfg. Co., Inc., Case No. B256314 (2d Dist., Div. 4 Jan. 29, 2016) (published) learned that this exception can and will result in a brutal reversal.

     There, former attorneys had an actual conflict—simultaneous representation—resulting in a disqualification. Former client refused to pay claimed fees of $1.3 million, resulting in an arbitration where a three arbitrator panel awarded about $1.12 million in compensatory damages for unpaid fees plus interest which got the total award to about $1.3 million. The trial court confirmed the arbitration award, only to see all of this get reversed on appeal by the 2/4 DCA.

     The appellate court found that California Rules of Professional Conduct Rule 3-310 was a fundamental public policy such that it showed former client was challenging the entire representation contract with Sheppard, Mullin as being tainted due to the conflict. The trial judge, not the arbitrators, should have determined illegality when the entire contract was under challenge. The reviewing court found that S, M was not entitled to fees during the conflict as a matter of law under Rule 3-310, but remanded for a determination of when the actual conflict arose. But, that did mean that a $1.3 million award went POOF! and it is unlikely any subsequent proceeding will result in an award anywhere close to the prior number.

     California Mediation and Arbitration also posts about this case on January 31, 2016.

POOF!/Prevailing Party: $1.8 Million Interest, Costs, and Fee Award Goes POOF! When Appellate Court Trims Compensatory Award From $1.1 Million To $117,050

 

Prevailing Party Status Had To Be Redetermined After Reversal.

    Hot Rods, LLC v. Northrop Grumman Systems Corp., Case No. G049953 (4th Dist., Div. 3 Dec. 7, 2015) (published) shows how appellate practice is not for the faint of heart.  The reviewing court will review the case for legal errors and will reverse based on finding they exist.  That is what happened in this one.
   
    Here, a referee via stipulation entered a $1.1 million compensatory award and $1.8 million interest, costs, and fee award to plaintiff for environmental remediation issues under a purchase agreement.  The defense appealed, and was wise to do so.  On appeal, the compensatory award got slashed and the other award went POOF! in a 3-0 decision authored by Justice Moore.

    First of all, the appellate court did enforce a contractual provision that extrinsic evidence was not allowed in interpreting the purchase agreement, a clause not adhered to by the referee—with the appellate court disregarding extrinsic evidence in its further analysis of the issues.  The indemnity clause in the purchase agreement was found facially broad enough to cover first and third party claims.  However, the real rub was that no evidence supported the referee’s $1 million “loss of use” compensatory award, because all of the introduced evidence was probative only on “diminution in value of the property” recovery.  The only damages that held up on appeal were consequential ones adding up to $117,050.

    That severe of a haircut on the merits also meant that the prevailing party issue had to be revisited on the interest/costs/fee component—a large $1.8 million award went POOF! (for now).

SLAPP: SLAPP Winner’s Trial Court Win Of $12,270 Reversed Because Plaintiff Proffered Enough Evidence To Survive SLAPP Motion

 

Backdrop Was Diane Harkey’s Defamation Lawsuit Against State Board of Equalization Candidate After Her Exoneration In Alleged Fraud Charges For Her Husband’s Activities With Point Center Financial.

    The next post stems from a State Board of Equalization candidate race in which plaintiff, one of the candidates, allegedly made slanderous statements about Diane Harkey, another of the candidates, based on her involvement with her husband’s Point Center Financial business—with husband and his business found liable, but with the jury exonerating Ms. Harkey.  However, plaintiff candidate had insinuated—even though a statement can be literally true, its “gist or sting” can be false and actionable as defamation—that Ms. Harkey had been sued for fraud even though plaintiff neglected to inform anyone she had been exonerated (or, at least, Ms. Harkey presented evidence plaintiff knew of the exoneration).  Plaintiff moved to SLAPP Ms. Harkey’s suit, but she voluntarily withdrew the suit.  However, the trial court awarded plaintiff $12,270 in attorney’s fees based on the theory that he would have been the prevailing party against Ms. Harkey if the SLAPP motion had been heard on the merits. 

    Ms. Harkey’s appeal of the adverse fee determination was successful, reversed in Harkey v. Wyland, Case No. G050197 (4th Dist., Div. 3 Dec. 8, 2015) (unpublished), a
3-0 decision authored by Justice Bedsworth.

    Although a voluntarily dismissal usually has adverse consequences, a different matter in the SLAPP context—the trial judge still has to determine if the SLAPP motion had merit in order to justify a fee award.  (Liu v. Moore, 69 Cal.App.4th 745, 753 (1999).)

     Given this standard, Ms. Harkey presented enough evidence to show that plaintiff may have known about the exoneration before making the alleged defamatory statement such that the SLAPP motion would not be meritorious.  That meant—POOF!—the SLAPP fee award evaporated on appeal.

Construction/POOF!: Losing Subcontractor On Private Project Retention Payment Dispute, Who Won On Appeal, Entitled To Fee Recovery Under Civil Code Section 8818

 

Subcontractor Hit With $150,000 Fee Award Below, Gets A Reversal Of Fortune—Merits Reversal Of Retention Claim Meant Subcontractor Now Gets To Seek Fees For Being the Winner On Appeal!

    

Here you may see what’s very rare,

The world turn’d upside down;

A tree and castle in the air,

A man walk on his crown.

     United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., Case No. B258860 (2d Dist., Div. 1 Dec. 3, 2015 modification, first posted Nov. 23, 2015) (unpublished) is an appellate example of a true reversal of fortune, especially a reversal of fee exposure based on an overturning of a lower court partial merits ruling.

     In this one, subcontractor sued contractor, among other things, for failure to make a retention payment in derogation of prompt payment statutes on a private construction project. Civil Code section 8818 has a fee-shifting provision which allows the prevailing party in a retention payment dispute to obtain recovery of costs and reasonable attorney’s fees. Contractor prevailed in the lower court, obtaining a fee award of $150,000 based on section 8818.

     On appeal, the fee award went POOF! and much more.

     The appellate court determined that contractor could not prevail on the merits of the retention payment claim because its dispute did not relate to the retention alone but to other collateral performance/damages disputes, with subcontractor showing that there was no good faith defense to the retention dispute alone—following the reasoning of East West Bank v. Rio School District, 235 Cal.App.4^th 742 in the process that such a merits award was anchored to a “retention only” dispute. As a result, the section 8818 fee award against subcontractor not only had to be reversed, but subcontractor on remand got to pursue its fees against contractor (the prior winner)! Quite a reversal of events.

POOF!/Prevailing Party: Winning Party In “Botched” Sale Of Advertising Sign Dispute Sees $369,284 Fee/Costs Award Go Away With Reversal Of Certain Tort Claims

 

$20,000 “Botched” Sale Resulted In Lots Of Damages And Fees, With A “Re-do” Based Upon Partial Reversals of Compensatory and Punitive Awards.

     You gotta love how appellate courts can summarize disputes. Take Young Electric Sign Co. v. PC Dixon 1, LLC, Case No. C072212 (3d Dist. Oct. 28, 2015) (unpublished), modified Nov. 30, 2015 (unpublished) for example: “In this case, the botched sale of an advertising sign for approximately $20,000 turned into a jury verdict of $832,715 for damages based on lost profits, $3 million in punitive damages, and $369.284 in attorney fees, cots, and expert witness fees.”

     So what happened on appeal by the losing party? The appellate court reversed a fraudulent concealment verdict, a punitive damages award, a negligent misrepresentation award, and a conversion lost profits award. Because the fee award was based on the contractual fees clause also covering overlapping tort claims, the reversal of several of the tort claims meant that fee/costs award needed to be reversed and remanded to the trial court for a relook after the merits were reexamined.

Arbitration/POOF!: Postjudgment Arbitration Confirmation Attorney’s Fees Award Goes Away When Appellate Court Found Arbitration Was Not The Proper Controversy Forum

 

Parties Have To Go Back To Court, Says Appellate Court.

    In Ahern v. Asset Management Consultants Inc., Case Nos. B253974/B257684 (2d Dist., Div. 7 Aug. 11, 2015) (unpublished), defendants successfully moved to compel arbitration against plaintiffs based on the theory they were bound by an arbitration clause in a real estate purchase/sale agreement even as non-signatories.  The defense convinced the superior court to grant a motion to compel arbitration, obtained a favorable result in the arbitration, and obtained $26,435 in attorney’s fees and $9,403.76 in costs for confirming the arbitration award as a judgment as well as resisting efforts to vacate the arbitration award.

    All of that went away on appeal—POOF! 

    The appellate court found that the losing parties were nonsignatories not bound by the arbitration clause, resulting in a reversal of the superior court’s order compelling arbitration—meaning everyone went back to court.  Based upon the reversal of the arbitration award-based judgment, the postjudgment fees/costs award also was reversed.  (Creative Ventures, LLC v. Jim Ward & Associates, 195 Cal.App.4th 1430, 1452 (2011).)

     Ouch for some, relief for others – though complete relief may be temporary, as the underlying merits remain to be decided.

    We also refer you to Marc’s discussion of the nonsignatory merits ruling on the enforceability of the arbitration provision in his August 11, 2015 post on the case.

Costs, Deeds Of Trust, Fee Clause Interpretation, Prevailing Party, Section 1717: Deed Of Trust Trustee Did Prevail Under Civil Code Section 1717 Where It Defensed Tort Claims And It Took Neutral Position On Contractual Claim Under Broadly Worded Fees Cla

 

POOF!:  Award of Fees/Costs To Plaintiff Reversed, With Remand To Award Fees/Costs To Prevailing Trustee.

     Torigian v. WT Capital Lender Services, Case No. F068393 (5^th Dist. June 24, 2015) (unpublished) is an interesting unpublished decision, authored by Acting Presiding Justice Cornell, where a neutral trustee under a deed of trust was found to have prevailed under a broadly worded fees clause after having taken neutral actions with regard to a contract claim but defensing plaintiff’s tort claims.

     In this one, plaintiff borrower sued to primarily enjoin a nonjudicial foreclosure initiated by a lender, contending that the loan had been paid off four years earlier. The trustee under the deed of trust smartly, at the outset, filed a declaration of nonmonetary status pursuant to Civil Code section 2924l, which is a “neutrality” position taken with respect to the contractual claims and any injunctive relief requests as far as enjoining the foreclosure. Plaintiff also brought tort claims against trustee, ostensibly seeking money for slander of title and negligence. Trustee successfully obtained summary adjudication of the negligence and slander of title (monetary) causes of action based on the litigation privilege. Both plaintiff and trustee moved for routine costs and attorney’s fees under broadly worded fees clauses in the deed of trust. The lower court awarded plaintiff $120,834.50 in fees/other routine costs and refused to award costs or fees to trustee, prompting an appeal by trustee—which argued the fees/costs awards to plaintiff were erroneous, as was the denial of costs and fees with respect to trustee’s requests before the trial judge.

     Trustee won big on appeal.

     The equitable, nonmonetary claims for quiet title, declaratory relief, and injunction were “on the contract” under Civil Code section 1717, and the DOT fees clause was broad enough to encompass the monetary tort claims. Then, based on the true pragmatics of the parties’ positions and what occurred in lower court proceedings, the appellate court determined that trustee, not plaintiff, had prevailed: it remained neutral on the contract claims by filing the nonmonetary status declaration (in stark contrast to the trustee in Kachlon v. Markowitz, 168 Cal.App.4^th 316, 350 (2008), which did not remain neutral and only filed the nonmonetary status declaration close to trial), and it defensed the tort claims (under which plaintiff sought to recovery money against trustee). This meant that trustee should have been awarded fees, and plaintiff shouldn’t have. Because neither party obtained a monetary recovery, the claims against trustee were not dismissed, and plaintiff obtained an equitable judgment against trustee, the case—with respect to routine costs—fell within the catch-all provision of CCP § 1032(a)(4) which allows the trial court discretion to determine the prevailing party by comparing the relief sought with that obtained, along with the parties’ litigation objectives. Trustee accomplished its objectives of defeating the tort claims and did not oppose nonmonetary relief such that it was the prevailing party for purposes of a routine costs award, not plaintiff.

     Reversed so that trustee could seek recovery of attorney’s fees and costs, with the fee and costs awards to plaintiff going POOF! on appeal.

POOF!, SLAPP: $39,246 Defense SLAPP Fee Recovery Goes POOF! On Appeal

 

Reversal of SLAPP Grant Also Resulted in Fee Recovery Going Away.

     In Kovac Media Group, Inc. v. LaPolt, Case No. B247579 (2d Dist., Div. 3 Feb. 25, 2015) (unpublished), plaintiff talent manager sued defendant entertainment attorney in an action over common clients. Lawyer SLAPPed three out of six causes of action, with the lower court awarding $39,246 in fees under the mandatory SLAPP fee-shifting statute to the defending attorney.

     That went POOF! permanently on appeal when the appellate court determined that the SLAPP grant was infirm given that the defense did not even satisfy the first prong of merits SLAPP analysis.

Costs, Intellectual Property, POOF: Costs Against Copyright Infringement Plaintiff Went POOF Upon Reversal Of Summary Judgment In Favor Of Defense

 

License Agreement Involving the “Four Seasons” Was At Center Of Controversy.

     This next post is a fun one, involving the “Four Seasons” and “Jersey Boys,” and of course the different band members and an agreement between all of them granting transfer of rights about aspects of their lives with the band, including biographies.

     In Corbello v. DeVito, No. 12-16733 (9^th Cir. Feb. 10, 2015) (published), in a 3-0 panel opinion (but with a concurring opinion), a district judge granted summary judgment against plaintiff, who was an heir of Rex Woodard, himself a ghostwriter of an unpublished autobiography of Thomas DeVito, a former member of the “Four Seasons,” based on copyright infringement claims (mainly, accounting and declaratory relief). Earlier, in 1999, Mr. DeVito and former band member Nicholas Macioci executed an agreement granting Franke Valli and Bob Gaudio the exclusive rights to use aspects of their lives related to the “Four Seasons” in a development of a musical—which we know to be the “Jersey Boys,” wildly successful in nature. A district judge determined that the agreement was a “selectively exclusive license” such that no copyright accounting of profits was owed to any former co-owner, even taxing costs against plaintiff. (That is federal parlance for granting costs in favor of the successful defendants at the time.)

     The summary judgment win and costs award went POOF! on appeal.

     The panel decided that the matter really involved a transfer of Mr. DeVito’s derivative-work rights in the autobiography rather than a nonexclusive license, such that copyright co-owners had to account to others for profits. The panel reversed the summary judgment based on an implied licensed, but remanded because there were factual issues relating to a reversionary interest issue arising under the agreement.

     Because the merits were reversed, the costs award also fell. (Cusano v. Klein, 264 F.3d 936, 951 (9^th Cir. 2001).) In addition, plaintiff was awarded costs on appeal as the prevailing party. (Fed.R.App.P. 39(a)(4).) So, plaintiff, “who loves you pretty baby”—looks like the Ninth Circuit did.

 

Allocation, Construction: Fee Award Under Public Contract Code Section 7107 Remanded For Redetermination

 

Appellate Court Ordered Apportionment to Limit Fee Award to Those Incurred Solely to the Section 7107 Claim, Meaning $3.85 Million Fee Recovery Went POOF!

For Now.

     In FTR International, Inc. v. Rio School Dist., Case No. B238618 (2d Dist., Div. 6 Jan. 27, 2015) (partially published; fee discussion published), school district and its general contractor engaged in a decade-long legal battle after the school was completed, with general contractor eventually obtaining a judgment exceeding $9 million against district. $3.85 million of this judgment was attorney’s fees to contractor under Public Contract Code section 7107, which allows a prevailing party to recover fees and costs in an action for wrongfully withheld retention payments.

     District appealed, with the Second District, Division 6, in a 3-0 opinion authored by Presiding Justice Gilbert, affirming most aspects of the merits ruling but remanding the fee recovery for redetermination.

     The fee recovery was reversed because the appellate court determined that work on an unclean hands defense did not apply as a legal matter of law such that the lower court erred in allowing recoupment of work on this defense with respect to the section 7107 claim. Instead, on remand, the reviewing court directed that fee recovery should be apportioned differently, limited to fees incurred solely in relation to contractor’s cause of action under section 7107.

POOF!/Sanctions: Appellate Reversal Of Without Leave Demurrer Ruling Meant Taxpayer’s Constitutionality Challenge Was Not Frivolous

 

Lower Court’s $5,000 Sanctions Order Reversed.

    Egyptian taxpayers seized for non-payment of taxes.  H.G. Wells, The Outline of History (1920).  From Wikipedia article on Tax Resistance.

      In Berjikian v. Franchise Tax Board, Case No. B252427 (2d Dist., Div. 7 Jan. 12, 2015) (unpublished), two taxpayers challenged the constitutionality of a Business and Professions Code section that automatically suspended their driver’s license and pharmacist’s license when their names appeared on the Franchise Tax Board’s list of the state’s 500 most delinquent taxpayers. The lower court sustained a demurrer without leave as to taxpayers’ complaint, a ruling reversed on appeal with respect to certain state and procedural due process rights arising out of enforcement of the statutory section. However, because it believed the action was frivolous, the lower court imposed $5,000 in sanctions under Revenue and Taxation Code section 19714, which allows a mandatory sanctions to be imposed where a taxpayer’s position is frivolous in nature.

     The sanctions award, too, was reversed. Given the merits reversal that certain due process violations were adequately pled, the sanctions had to go POOF! also.

Settlement/Poof!: Court Of Appeal Refuses To Enforce Settlement Because Email Failed Electronic Signature Test–And Attorney’s Fees Go Poof!

Dot I’s and Cross T’s When Relying On An Electronic Signature!

     In J.B.B. Investment Partners, Ltd. v. Fair, Case Nos. A140232, A141228 (1/2 Dec. 30, 2014) (Kline, Richman, Stewart), the Court of Appeal reversed a trial court’s enforcement of a settlement agreement under CCP section 664.6, because email and voicemail messages failed to satisfy the electronic signature requirements.  And because the settlement agreement could not be enforced by plaintiff, plaintiff could not recover attorney’s fees.  This case is must reading for attorneys and their clients conducting business by electronic transactions under the California Uniform Electronic Transactions Act (UETA).

     The parties briefed whether the email complied with the the UETA provision:  “If the law requires a signature, an electronic signature satisfies the law.”  Civ. Code, section 1633.7(d).  That was too simplistic for the Court of Appeal, which pointed out that the plaintiffs failed to demonstrate that the parties agreed to conduct transactions by electronic means or that defendant intended with his printed name at the end of his email to sign electronically plaintiff’s offer.  See Civ. Code, sections 1633.2 and 1633.5(b).  Under a separate common law contractual analysis, the Court also failed to find that the parties intended to form a contract, given that further settlement documents were not signed.

     A version of this post also appears today on the California Mediation and Arbitration blog.

Private Attorney General: $119,313.50 CCP § 1021.5 Fee Award Goes POOF! On Appeal

 

Reason Was That Plaintiff Was Not Successful Party As A Matter Of Law Under Catalyst Theory.

     Plaintiff in Washoe Meadows Community v. Cal. Dept. of Recreation, Case No. A139197 (1^st Dist., Div. 5 Dec. 30, 2014) (unpublished) obtained an attorney’s fees award of $119,313.50 in a CEQA mandate proceeding involving a challenge to relocation of a golf course based upon erosion from the Upper Truckee River. Plaintiff’s goal was to stop or suspend the relocation project, but this did not happen after some on-going correction of EIR deficiencies. The lower court agreed with plaintiff that it was a catalyst entitled to 1021.5 fees.

     The appellate court disagreed as a matter of law, reversing the fee award. (By the way, as bloggers, we will indicate 1021.5 fee awards do get very strict scrutiny on appeal in our general experience.)

     The First District, Division 5 determined that plaintiff was not a “successful party” for 1021.5 purposes. In its opinion, the plaintiff did not obtain primary relief as far as stopping or disrupting location of the golf course. Rather, causation was missing because the minor EIR deficiencies were corrected in the course of an on-going process—a “limited do-over” (nice catch phrase, no?) found insufficient to allow recovery under the catalyst theory.

Private Attorney General/Sanctions/Special Fee Shifting: Defendants Winning Demurrer On B & P Code Section Relating to Legal Advertising Improperly Awarded Fees Under B&P Code § 6158.4(i), Incorporating Private Attorney General Fee Entitlemen

 

$18,900 Fee Award Goes POOF!, But Opponent’s CCP § 128.7 Motion Correctly Denied Where Defendants Trimmed Fee Request Down After Getting Safe Harbor Documents.

     This next opinion, Ashegian v. Beirne, Case No. B254020 (2d Dist., Div. 4 Nov. 19, 2014) (unpublished), is interesting because it deals with a first impression issue relating to the proper interpretation of Business and Professions Code section 6158.4(i), which allows a litigant to obtain a mandatory fee award for prevailing in an action involving a challenge to the propriety of legal advertising if fees are proper under Code of Civil Procedure section 1021.5 (the private attorney general statute), assuming “the court finds that the action has resulted in the enforcement of an important public interest or that a significant benefit has been conferred on the public.” (This “or” language would be of importance in the appellate court’s ultimate decision.)

     The facts are that defendant attorneys successfully demurred to a plaintiff’s action challenging that the attorneys’ Internet advertising violated State Bar Act regulations. (As observed already, there is a fee-shifting provision for a prevailing party under this scheme.) The attorneys successfully demurred to the complaint on the basis that plaintiff failed to satisfy the procedural requirement by first submitting a complaint to the State Bar, a determination affirmed earlier in an unpublished appellate decision. However, attorneys then moved for fees under B&P section 6158.4(i), prompting plaintiff to send a CCP § 128.7 safe harbor missive in an attempt to coax withdrawal of the motion. In response, attorneys scaled back their fee request from $46,300 to $18,900 for fees only incurred on appeal and for “fees on fees” associated with the fee motion itself. The lower court granted the $18,900 “trimmed down” fee request and denied plaintiff’s request for 128.7 sanctions. Plaintiff appealed, obtaining a partial reversal on the fees order but not winning the challenge to the sanctions denial.

     Acknowledging that a first impression issue was presented about whether fee entitlement was proper under B&P section 6158.4(i), the appellate court first determined that defendant attorneys, even though not plaintiffs, were just as entitled to fee recovery under the statute. However, it then had to confront the “or” language in section 6158.4(i), because the trial judge did find that there was an enforcement of an important public interest, but determined he did not have to find a significant benefit. The conundrum was that section 6158.4(i) incorporated fee entitlement under the private attorney general statute, which requires that both of these elements satisfied. In the end, the appellate court agreed that both elements had to be satisfied under section 6158.4(i), which set the stage for reversal.

     Reversal was predicated on the appellate court’s determination that defendant attorneys could not show a significant benefit was conferred on the general public/a large class of persons as a matter of law. Rather, the prior opinion was unpublished, setting no precedent, and there really had not been many suits under the Internet advertising statute such that the “win” mainly benefited only the defendant attorneys themselves. POOF! went the fee award.

     As far as the sanctions denial, that was no abuse of discretion. After all, defendant attorneys did trim down their fee request and the request was by no means unwarranted in nature so as to satisfy 128.7’s requirements.

Costs/Section 1717/Prevailing Party/Poof!: Former Client Prevailing In Fee Arbitration/Bench Trial Was Prevailing Party, Such That $ 1.16 Million Fee Award Against Client And In Favor Of Former Attorney Reversed As A Matter Of Law

 

Sears v. Baccaglio Decision Found Not Viable CCP § 1032 “Prevailing Party” Law.

     This one is an interesting one under section 1717/CCP § 1032 routine costs jurisprudence.

     Here, client at first suffered a default judgment of $86,676.88 in favor of former attorney, but client obtained relief from the default judgment from the appellate court in an earlier decision. Client then won a county bar fee arbitration and a later superior court bench trial against attorney, where attorney got no relief (and in fact an indication that client overpaid after prior judgment enforcement although client never cross-complained).

     However, here is the attorney’s fees and costs nitty-gritty. Attorney moved to recoup over $1.6 million in fees, and ex-client sought over $543,000 in fees. The lower court awarded attorney over $1.16 million in fees under a Civil Code section 1717 fees clause and $6,266.56 in routine costs under Code of Civil Procedure section 1032.

     The appellate court reversed in David S. Karton, A Law Corporation, v. Dougherty, Case No. B244231 (2d Dist., Div. 1 Nov. 14, 2014) (published).

     Under the pragmatic Hsu v. Abbara, 9 Cal.4^th 863 (1995) test governing section 1717 fees, client—not attorney—prevailed because it got an unqualified win except for things already collected. That meant the fee award got reversed and ex-client was determined to be the fee prevailing party.

     So what about costs also awarded to attorney? That too had to be reversed because client prevailed. Because neither plaintiff nor defendant obtained relief (a zero judgment), client was the prevailing party. The appellate court also disagreed with Sears v. Baccaglio, 60 Cal.App.4^th 1136 (1998) to the extent it suggested that a costs “prevailing party” determination is always discretionary, reasoning Sears was based on cases disapproved by the California Supreme Court or based on postdated cases holding otherwise.

    So, on remand, client was going to be able to recover fees and costs—quite a reversal of fortune.

Private Attorney General Fees: Award Of Fees To Patient Is Overturned Because He Did Not Show Enforcement Of Public Right Was Necessary

Fee Award Of $126,974.13 Goes Poof !

    The Sixth District has overturned a fee award to an unfortunate dental patient for injuries arising from negligently performed dental work because private enforcement of the public right vindicated was unnecessary – a predicate for recovery of fees under California Code of Civil Procedure, section 1021.5.  Bui v. Nguyen, Case No. H039310 (6th Dist. Oct 28, 2014).

     The patient received significant relief:  $150,000 against Hi-Tech Dental, Inc., and $50,000 against Hi-Tech’s owner and dental assistant.  Additionally, the patient obtained an injunction requiring the dental assistant to identify herself as a dental assistant, not a dentist, in advertising, and to refrain from wearing a white dental lab coat. 

     Notably, the trial court “found that a significant public benefit resulted from enjoining further violations of Business and Professions Code sections 17200 and 17500.”  Also, the trial court found that private enforcement was necessary, and that in the interest of justice, attorneys’ fees should not be paid out of the recovery.  Declarations submitted by plaintiff pointed to the unlikelihood of public enforcement.

     So why was the fee award reversed?

      The Court of Appeal rejected the declarations that pointed to the unlikelihood of public enforcement as conclusory and lacking in specificity.

     According to the Court of Appeal, “[t]here was no substantial evidence presented from which the court could have reasonably concluded that the third criterion – necessity of private enforcement – had been met.”

     Taking issue with a statement in Professor Richard Pearl’s treatise on California attorney’s fees that “the private enforcement requirement limits fees only when private enforcement is demonstrably unnecessary,” the Court states:

“The applicant bears the burden of establishing each criterion required for an attorney fee award under section 1021.5, including the necessity of private enforcement [citation], and the court must ‘consider[] all circumstances bearing on the question of whether private enforcement was necessary.’ [citation].”  (footnote 9).

Civil Rights/POOF: Reversal Of Discrimination Claim Based On Instructional Error Meant Entire Fee/Costs Award Went POOF!

 

$503,450.02 Fee Award and $31,679.08 Costs Award Went Away For Now, Even Though Reversal As To Only One Defendant.

     Plaintiff won a FEHA-based lawsuit against both a school district and an individual in Norton v. San Bernardino City Unified School District, Case No. G049496 (4^th Dist., Div. 3 Oct. 9, 2014) (unpublished). After a 39-day trial, a jury awarded $360,000 in total damages, with $130,000 against District. Plaintiff also won a $503,450.02 fee award and $31,679.08 costs award against both defendants.

     The appellate court reversed on instructional error with respect to an element of the discrimination claim against the District. However, because it could not say that the fee/costs award against both defendants was not influenced by the discrimination recovery against District, the partial reversal meant the entire fees/costs award went POOF! as to both defendants.

     Justice Fybel penned the decision on behalf of a 3-0 panel.

Costs/POOF!/Family Law: Trifecta Of Appellate Decisions For 9/16/14

 

Raceway Ford Cases, Case Nos. E054517/E056595 (4^th Dist., Div. 2 Sept. 16, 2014) (published)

     In this one, the defense—except for one fraud claim as to one plaintiff—waxed plaintiffs bringing various consumer and unfair competition claims. Defendants’ reward was a $1,503,084.50 fee recovery under various statutes. However, that went POOF! on appeal when several of the claim adjudications were reversed after a bench trial. The reversals meant the fee recovery had to reevaluated down the line.

Marriage of Cross and Melim, Case No. H039666 (6^th Dist. Sept. 16, 2014) (unpublished)

     The family law judge hit an ex-wife with $3,537 fees under the Family Code section 271 sanctions statute. This award was found to be no abuse of discretion on appeal, because the record showed ex-wife had underestimated her income and had not shared emails showing she had bought Gucci/Louis Vuitton/2012 Raiders season tickets.

Farmers Ins. Exch. V. Karnazes, Case No. A138999 (1^st Dist., Div. 5 Sept. 16, 2014) (unpublished)

     A lower court denied a motion to tax costs by a defendant in an interpleader action. Appellant tried to argue that an “each side will bear their own costs and fees” clause in a settlement agreement bound a nonparty to agreement, an argument not liked by the appellate court. Also, appellant presented “only a barrage of conclusory assertions” rather than reasoned arguments about the alleged impropriety of certain costs, which again did not impress the reviewing court.

Equity/POOF!/Substantiation Of Fees: Reversal Of Default Judgment To Ex-Attorneys Against Client Meant Award Of Fees Had To Be Revisited Also

 

Further, Costs Needed To Be Authenticated Better.

     Bohm, Matsen, Kegel & Aguilera v. Bonilla, Case No. G048212 (4^th Dist., Div. 3 Sept. 9, 2014) (unpublished), authored by Justice Bedsworth, had this to say about a default judgment which needed some more development on remand: “Once again, we reiterate that obtaining a default is not the legal equivalent of hitting a fair ball into the stands, after which the plaintiff makes a pro forma trot around the bases. The Code of Civil Procedure requires a prove-up; therefore, a plaintiff seeking a default judgment must prove its entitlement to the amount requested. For its part, the trial court does not merely sign off on whatever amounts the plaintiff sets down on the judicial council form. The court must instead evaluate the supporting evidence.”

     Babe Ruth & Mascot.  1922.  Library of Congress.

     In this situation, law firm obtained a $2.2 million default against an ex-client after recovering a substantial amount in a contingency fee case, although it was unclear how the recovered contingent amount was going to be distributed to client. In addition, the lower court awarded $24,733 in attorney’s fees and $312 in costs as part of the total “default judgment” packet.

     The appellate court found that the base default judgment amount had to be reconsidered given that it was unclear how the lower court came to the result it did. Similarly, fees had to be re-fixed based on what was actually collected by client, depending on how the contingent recovery was to be paid. Finally, the litigation costs, which the client separately agreed to pay no matter what, had to be re-examined given that the costs were not properly authenticated.

POOF!/Prevailing Party/Trade Secrets: Prior Reversal Of Tort Claim Dismissals In Trade Secret Case Meant Attorney’s Fees Award Had To Be Overturned Also

 

$1.5 Million Award Went POOF!

     Earlier, in Angelica Textile Services, Inc. v. Park, Case No. D063027 (4^th Dist., Div. 1 Aug. 19, 2014) (unpublished), the appellate court overturned a lower court dismissal of certain tort claims based on the notion that the Uniform Trade Secrets Act (UTSA), which has a fee-shifting provision if the defense can show the plaintiff prosecuted a trade secret action in bad faith, displaced the tort claims, although a jury found there was no “trade secret” on the UTSA claim. However, the lower court had awarded the defense $1.5 million in attorney’s fees for bad faith trade secrets prosecution (yep, no typo here), which led plaintiff to appeal the fee award.

     Plaintiff was successful …. at least at this point in the litigation.

     The fee award at this stage had to be reversed for two reasons.

     First, given that the prevailing party under the UTSA fee-shifting statute is a pragmatically-driven decision, the appellate court was unable to determine who really “won” given the pendency of related tort claims, including one for breach of loyalty based on defendants officers’ setting up of a competing business.

     Second, it was no “slam dunk” that subjective bad faith was shown, one of the prongs of the USTA fee-shifting statute. Obviously, if plaintiff were to prevail on the tort claims, it would be difficult to find bad faith. So, the future is what will determine the result in this one. Stay tuned, maybe or maybe not—depending if a settlement can be had in the meantime.

Civil Rights/Private Attorney General: Plaintiff Winning Mandate In Riverside County Termination Case Gets $99,665 In Fees Evaporated On Appeal

 

Neither CCP § 1021.5 Nor 42 U.S.C. § 1988 Supported Fee Award.

     In Rivera v. County of Riverside, Case No. E055956 (4^th Dist., Div. 2 Aug. 1, 2014) (unpublished), plaintiff obtained mandate for an administrative hearing based on her termination by the County of Riverside under unusual factual circumstances, eventually leading to a reinstatement. She later received an award of $99,665 in attorney’s fees under both CCP § 1021.5 and 42 U.S.C. § 1988.

     The fee award was reversed on appeal.

     Under 1021.5, the appellate court disagreed that there was any significant benefit to the general public or a large class of individuals. The reinstatement objective was singular to plaintiff, and the fact a cautionary message alone was sent to County for purposes of handling similar circumstances did not carry the day. (LaGrone v. City of Oakland, 202 Cal.App.4^th 932, 946 (2011).) The Court of Appeal also found that the judgment occurred in a non-recurrent situation where the County violated due process based on plaintiff moving to a different location and confusion on what to do—something not likely to be repeated in the future.

     With respect to section 1988, the fee award fell because plaintiff did not show that her termination was caused by an official policy or custom of County versus an aberrant gaffe.

Costs/POOF/SLAPP: Two-Fer—Appellate Costs Award Affirmed Based On Costs Memorandum And $37,857.97 SLAPP Fees/Costs Award Goes POOF! Upon Reversal Of SLAPP Grant

Karnazes v. Hartford, Case No. A139421 (1st Dist., Div. 2 June 27, 2014) (unpublished)

​In a long-standing antagonistic battle between two former law partners, a cross-respondent was awarded costs by the appellate court after a cross-appeal was dismissed. The winner then filed a costs memo for $627.50 in appeals costs, prompting yet another appeal after the trial court denied a motion to strike/tax costs. Because the verified costs memo is prima facie evidence of the propriety of costs, and the items were expressly allowable under the CRCs or were reasonable, this one got affirmed.

Watkins v. Anderson, Case No. A139322 (1st Dist., Div. 5 June 27, 2014) (unpublished)

​Different matter in this one, but the parties did a commendable thing on appeal. Earlier, a SLAPP grant was reversed, which mean that the $37,857.97 fees/costs award went POOF! also. Because the losing party had separately appealed the fee award (a prudent move), the parties got together and stipulated to a reversal, an award of appellate courts to the winner, and issuance of the remittitur forthwith. The appellate court gave effect to the parties’ stipulation in every way.

 

Posted with Blogsy

POOF!/Retainer Agreement/Prevailing Party and Section 1717: Appellate Court’s Reversal of Fee Disgorgement Order Meant Remand Necessary To See Who Prevailed

 

Client’s Fee/Costs Recovery of $688,634 Goes POOF! For Now.

     In Fleischman v. Law Office of Paul Stanton, Case No. B216898 (2d Dist., Div. 8 June 12, 2014) (unpublished), which involved nasty conservatorship/elder abuse claims among trust beneficiaries with respect to a deceased trustee, client was able to invalidate a retainer agreement which placed two restrictions on his right to terminate his attorney, namely, (1) elimination of an hourly rate discount and restoring the normal hourly rate if attorney was discharged before the litigation ended, and (2) clarification that a bad faith termination of services prior to acceptance of settlement would result in fees being owed at the “greater of” value of fees owed under the agreement (hourly and hybrid contingency) or fees at a value of double the hourly rates. Client, however, lost malpractice and fiduciary breach claims against attorney. Nonetheless, based on the retainer agreement invalidation, the lower court ordered attorney to disgorge all fees received ($400,775 plus interest of $318,043.97). Then, the lower court also awarded client attorney’s fees/costs of $688,624 based on a fees clause in the retainer agreement under Civil Code section 1717. Attorney appealed.

     The appellate court reversed and remanded because it found that the in toto disgorgement order was infirm as too much of a forfeiture. The record showed that, during the litigation, the attorney did not attempt to enforce the unlawful provisions such that they could effectively be severed out and did not taint the hourly fees actually paid given the client did concede obtaining services from attorney and never complained about the services until later (around $113,000 in fees). However, there were some procedural irregularities in some portions of the disgorgement order so it had to go back for a “re-do.”

     With this happening, one can probably predict what then occurred with respect to the fee award. Civil Code section 1717 requires a “prevailing party,” with the legal landscape changing with the reversal of the disgorgement order which involved two-thirds of the client’s net monetary recovery in the first place. So, until a remand determined what recovery occurred in the future, the trial court had to wait for the future results for purposes of determining a prevailing party, if any, and the amount of fees after the “litigation dust” settled later on.

POOF! $1.513 Million Fee Recovery Evaporates When Appellate Court Reverses And Remands For New Trial On Damages

 

$14.625 Million Jury Compensatory Award Went Away, Too.

     Concept Chaser Co., Inc. v. Pentel of America, Ltd., Case Nos. B241929/B243330 (2d Dist., Div. 7 May 27, 2014) (unpublished) drew a majority and two concurring opinions in a case where a breach of contract jury verdict of $14.625 million and postjudgment fee award of $1,512,999 went POOF! when the appellate court reversed and remanded for a new trial of actual damages to the likely chagrin of the formerly prevailing plaintiff. What was the basis for the reversal and remand? A funky liquidated damages clause indicating that defendant would pay a “penalty” for each unauthorized usage of plaintiff’s idea to promote HyperG pens “of $10,000.”

Driving goats from pen into shearing pen.  Russell Lee, photographer.  1940.  Library of Congress.

The appellate court justices found there was no mutual assent to the damages provision because there was no clear-cut formula to advice the parties on how liability would be imposed or, alternatively, the liquidated damages clause was invalid/was an unlawful penalty. So, the matter went back for a new trial on actual damages, with the reversal meaning it was premature to award fees until a prevailing party was determined upon remand. Quite a shearing!

Deeds of Trust/POOF!: Trial Court’s Judicial Imposition Of Lien On Future Third Party Tortfeasor Monetary Recovery, Including Fee And Costs Awards, Goes POOF! On Appeal

 

Judicial Lien Imposition Found to be the Equivalent of an Improper Deficiency Judgment.

     Borrower/former owner of San Diego property damaged by 2007 wildfires was nonjudicially foreclosed out of the property by a junior lienholder, which held the property for a couple of years before losing it to a foreclosing senior lienholder. Former owner then sued San Diego Gas & Electric and other third party tortfeasors for various claims relating to the wildfires, with the junior lienholder suing owner back to impose a judicial lien on any future recoveries from the third party tortfeasors or for equitable conversion recovery.

     The lower court did impose a judicial lien in the amount of $837,385, plus interest, attorney’s fees and costs.

     The appellate court, in Thoryk v. San Diego Gas & Elec. Co., Case No. D062680 (4^th Dist., Div. 1 Apr. 9, 2014) (published), reversed, examining the trust deed language and determining the judicial lien imposition was the equivalent of an impermissible deficiency judgment. That meant the fee/costs awards went POOF! The decision is interesting reading for real estate practitioners and title companies to show how trust deed language needs to be made specific to include these types of recoveries as personal property subject to more lender-friendly mixed collateral rules.

POOF!: $127,610 CEQA Fee Award Goes Away When Appellate Court Reverses And Orders Dismissal Based On Short-Fused Validation “Statute of Limitations”

 

Lodestar Plus 2.0 Positive Multiplier Fee Award Went Away.

     Van de Kamps Coalition v. L.A. Community College District, Case No. B241970 (2d Dist., Div. 2 Apr. 2, 2014) (unpublished)involved a CEQA challenge in litigation between plaintiff and LACCD (primarily) regarding the historic Van de Kamp’s Bakery property located around Fletcher Drive and San Fernando Road in Los Angeles. The Bakery buildings were purchased by LACCD in 2001 in order to preserve them and create a satellite community college campus.

     Plaintiff won a couple of CEQA challenges and was awarded $127,610, after the trial judge reduced the lodestar but added a 2.0 positive multiplier to the reduced lodestar number.

     That all went away on appeal. Even though the legal argument was raised first time on appeal, the reviewing court found that a 60-day “statute of limitation,” short-fused time deadline under the Validation Act was dispositive, resulting in an order of dismissal and a POOF! as far as the fee award was concerned.

Van de Kamp’s Bakery Building, 1930.

Construction/Fee Clause Interpretation: Where Payment Bond Made Clear That Surety Not Liable To Additional Fees/Costs Above Penal Bond Sum, Party Obtaining Fees In Derogation Of This Limitation Not Entitled to Fees

 

Only County Entitled to Additional Fees/Costs Over Penal Sum Based on Clear Terms in Payment Bond.

     In Granite Constr. Co. v. Bond Safeguard Ins. Co., Case No. C066759 (3d Dist. Mar. 13, 2014) (unpublished), surety under a payment bond lost an exoneration argument at trial based on a settlement agreement which had a release that was only effective if payment was made; because payment wasn’t made, the release never occurred so no prejudice attended in relation to an argument that a release of a defaulting contractor harmed surety. However, the lower court did hit surety with $224,541.34 in attorney’s fees (a fee award in favor of contractor) based upon some attorney’s fees clauses in the payment bond.

     That fee award against surety was reversed—went POOF! on appeal.

     The bond language was dispositive in this one. It did provide for an award of fees and costs incurred by County (a party to the subdivision agreement), but did not provide for any additional fees or costs above the penal sum of the bond to parties like contractor--although the contractor was a beneficiary for amounts up to the penal sum. (Nissho of California, Inc. v. Bond Safeguard Ins. Co., 220 Cal.App.4^th 974, 991 (2013).) No different result occurred under Civil Code section 1717 because a surety is not liable for attorney’s fees in excess of the penal sum of the bond unless the contract specifically obligates otherwise. (National Technical Systems v. Superior Court, 97 Cal.App.4^th 415, 425-426 (2002).) Because the fees awarded would exceed the penal sum, that award was reversed.

Appealability/Homeowner Associations/POOF!: Merits Reversal Also Meant Fee Award Went POOF! Even Though No Appeal From Fee Order Was Achieved

 

Important Nuance to Keep in Mind—Trial Court Directed to Vacate Fee Award.

     Bel Air Glen Homeowners Assn., Inc. v. Dowlatshahi, Case No. B243549 (2d Dist., Div. 1 Mar. 5, 2014) (unpublished) has a Monty Pythonesque quality about it.

     What happened was that an HOA Board of Directors got its directors’ collective hackles up when a homeowner, who was asked for a copy of a lease to different occupants (an attorney and his family) based on a CC&R requiring delivery of a lease upon demand, kept responding “there was no lease” and providing no other clarifying information. The problem was that attorney and family had been quitclaimed the condo unit; so, prior occupants truly did not have a lease, with the quitclaim deed being recorded later on. HOA finally sued former occupants and obtained a judgment for $2,000 is fines, plus $63,910 in attorney’s fees.

     Prior occupants appealed from the merits judgment, but not the fee award.

     The appellate court, in a silly walk sort of way, agreed with appealing parties that the quitclaim was not a lease, and they had no duty to provide the quitclaim rather than a lease.

     The reversal of the merits then brought the reviewing court with what to do about the fee award never appealed from (although it was a separately appealable order). Although the appeals court had no jurisdiction to review the award, it did indicate what the remedy was when a merits judgment is reversed: the trial court on remand should vacate the fee award. (Allen v. Smith, 94 Cal.App.4^th 1270, 1284 (2002).) $63,910 in fees to the HOA simply went POOF!, with the rest of the HOA members likely not being happy unless reserves covered the litigation—if not, special assessments might be coming to the chagrin of the HOA directors as well as members.

Allocation/POOF!: Split Decision On Applicability Of Two Guaranties Meant Dueling Fee Awards Had To Be Reconsidered On Remand

 

Even a Partial Reversal Can See a Substantial Fee Award Goes POOF!

     City of Novato v. Morgan, Case No. A130899 (1^st Dist., Div. 3 Feb. 27, 2014) (unpublished) involved the scope of personal guaranties to perform under two residential subdivision agreements. In prior litigation not involving the two guaranties, City was successful in actions against subdivision developers and received a fees award. However, because the developers could not satisfy the fee awards, City sought to enforce the personal guaranties and attempted to stick guarantors with the brunt of the fee awards.

     However, as with any litigation sagas, this one was convoluted and hard fought. (Co-contributor Mike is married to a Viking, so he understands.) 

 

     Magnus Barelegs Viking Festival.  Author: ardfern.  Wikimedia Commons Creative Commons Attribution-Share Alike 3.0 Unported license.

     No one really had a great argument that the guaranties did not have fee exposure if both guaranties were in play, but the real fight was about what was guaranteed—one or two subdivision agreements. So, developer got hit with a prior fee award of about $638,000 based on guaranty #1 in favor of City. Then, in subsequent litigation in the same matter, City lost its argument that guarantors were liable on guaranty #2, resulting in a $138,198.15 fee award in favor of defendant guarantors (obviously related to developers).

     City appealed the fee awards.

     Actually, somewhat of a draw, if we interpret the appellate decision correctly. The problem here was that there was a pragmatic “draw” on the dueling guaranty issues. The reviewing court determined that guarantors were not liable on guaranty #2, such that the prior fee award had to be looked at again. Given this uncertainty, the appellate court found that even the partial reversals meant the whole fee tamale had to be revisited. Apportionment maybe, intertwined result maybe, but back to the trial judge to see.

     Way back on April 5, 2011, we posted about consolidated appeals concerning the enforceability of the Subdivision Improvement Agreement involving the developer, in the prior litigation, and whether the trial judge erred by deciding attorney’s fees issues while the modified decision was on appeal.  

    

IP/POOF!/SLAPP: A SLAPP Fee Award And Copyright Claim Dismissal Fee Recovery Go POOF!, While Another SLAPP Fee Award Of $248,506 Plus Fees On Fees Affirmed

Appealing Parties Could Not Surmount Abuse of Discretion Standard on Second SLAPP Fee Award.

     In Graham-Sult v. Clainos, Case No. 11-16779 (9^th Cir. Feb. 5, 2014) (published), one defendants obtained a SLAPP fee recovery of $126,431.50 (out of a requested $133,431.50) and a second group of defendants obtained a SLAPP fee recovery of $248,506 (out of a requested $260,506.50) plus “fees on fees.” Another group of defendants received a $134,243.25 fee recovery (out of a requested $177,366.50 in fees, inclusive of $43,123.50 in “fees on fees”) for successfully obtaining a dismissal of a copyright claim, with fees awarded under the 15 U.S.C. § 505 fee-shifting statute.

     The Ninth Circuit vacated the first SLAPP award and copyright fee award based on reversing the merit rulings.

     However, the federal appeals court affirmed the second SLAPP fee award, because appealing parties could not hurdle the deferential abuse of discretion review standard. The argument that the fee award was unreasonable as compared to SLAPP fee awards in other cases was not a singular basis to reverse a fee award. Appellants also argued that the fee request included time for non-SLAPP activities, but the reviewing court took a liberal view of the SLAPP fee-shifting statute—finding it should encompass all activities when a district court, like here, concluded the lawsuit was baseless as to the successfully SLAPPing defendants.

POOF!: Reversal of Merits Meant Private Attorney General Fee Award Went Away Too

 

     Northern California Recycling Assn. v. County of Solano, Case No. A132844 (1^st Dist., Div. 3 Jan. 22, 2014) (unpublished) demonstrates our POOF! principle: reversal of a merits judgment generally means that an ensuing fee award (this one based on the private attorney general statute) also goes away, which it did.

Estoppel/Section 1717: Contract Only Allowing For Recovery Of Costs, Not Specifying Attorney’s Fees, Did Not Give Rise To Fee Recovery

 

However, Prevailing Party Did Get Routine, Non-Fee Costs Based on Waiver/Inadequate Record on Appeal.

     In Yamtob v. Alon, Case No. B247453 (2d Dist., Div. 5 Dec. 31, 2013) (unpublished), plaintiff lost a dispute to defendant/cross-complainant, who certainly obtained a net recovery judgment against plaintiff arising out of a diamond transaction. (Fitting over the Holidays, isn’t it?) The trial court also awarded defendant both routine costs and attorney’s fees in the final judgment, prompting an appeal by plaintiff.

     Plaintiff did well to appeal the fee award.

    The routine costs award to defendant was sustained, because plaintiff never objected to the award and the absence of a reporter’s transcript at the costs hearing made it impossible to show that any error was committed.

     The fee issue was different. Although many times the absence of a reporter’s transcript of a fee hearing can be fatal, not so, according to the appellate court, where the contract was unambiguous on fee entitlement. Here, the operative contract only talked about a payback of “all the costs incurred.” The appellate court concluded there is a key difference between fees and costs, such that attorney’s fees are generally not included as civil action “costs.” (Benson v. Kwikset Corp., 152 Cal.App.45h 1254, 1279 (2007).)

     That left defendant with arguing plaintiff was “judicially estopped” because plaintiff claimed fees under the same contract in his complaint, interrogatory answers, and trial opening argument, citing International Billing Services, Inc. v. Emigh, 84 Cal.App.4^th 1175 (2000) as support. The problem here is that Emigh has even been disavowed by other decisions out of the Third District from which it stemmed. (M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One, 111 Cal.App.4^th 456, 467 (2007); Bear Creek Planning Committee v. Ferwerda, 193 Cal.App.4^th 1178, 1187-1188 (2011); Brittalia Ventures v. Stuke Nursery Co., Inc., 153 Cal.App.4^th 17, 28-31 (2007).)

     So, the costs award survived but the fee award went POOF!, including the appellate directive that each side bear their respective costs on appeal.

Intellectual Property/POOF!: Reversal Of Copyright Infringement Claims Dismissal Means Fee/Costs Awards Went POOF!

 

$134,243.25 in Fees/$3,819.95 in Costs Went Away.

     Defendants prevailing on a successful motion to dismiss copyright infringement claims also requested $177,366.75 in fees (including $43,123.58 in “fees on fees”) and $3,819.95 in routine costs. The district judge awarded the defense $134,243.25 in fees and all of the requested fees based on a copyright fee-shifting statutory provision. However, the Ninth Circuit reversed the dismissal such that the fees/costs award went POOF! in Graham-Sult v. Clainos, Case No. 11-16779 (9th Cir. Dec. 27, 2013) (published).

Costs/POOF!/Prevailing Party: Reversal of Impact Fee Component Judgment Meant Prevailing Party Status Had To Be Revisited, But Not Costs Award

 

Substantial Fee Award Went POOF!

     Estancia Coastal, LLC v. KB Home Coastal, Inc., Case No. D062219 et al. (4th Dist., Div. 1 Dec. 16, 2013) (unpublished) involved a big fight between a developer hit with $6.5 million in developmental mitigation fees against assignee of a land owner giving an option to developer. The total award was $9 million, including some property tax and site development expenses also to assignee, plus a substantial attorney fee award (the amount of which was not detailed in the opinion).

     Well, the fee award went POOF! because the mitigation fee component of the judgment was eliminated. This required a revisit of who actually prevailed, using the pragmatic definition of the winner developed by case law. However, because assignee did win property tax and site development cost components, the routine costs award did not have to be reversed because assignee was the net monetary winner.

POOF!/Retainer Agreements: Although Attorney’s Retainers Had Unlawful Provisions, Attorney Did Not Seek To Enforce Them, With Disgorgement Of Previously Paid Fees Reversed

 

Appellate Court Also Reversed and Remanded Fee Award Against Attorney in Light of Disgorgement Reversal.

     This next case, Fleischman v. Stanton, Case No. B216898 (2d Dist., Div. 8 Nov. 19, 2013) (unpublished), is a wild one involving an ex-attorney whose retainer agreement was voided as well as having the trial judge ordering him to disgorge $400,755.00 to ex-client with interest in the amount of $318,043.97, plus an attorney fee award based on a contractual fees clause in favor of ex-client and against attorney to the the tune of $688,624. If our math is correct, ex-attorney faced a whopping $1.4 million (actually, a little more) in exposure.

     Ex-attorney likely was thankful for the appeals process. Hang on and we will tell you why, but first we do discuss some retainer agreement provisions which the reviewing court agreed were unlawful in nature--although they did not figure in the ultimate decision, because ex-attorney was not attempting to enforce them in the appellate court’s opinion.

     The first offensive provision specified that if client terminated attorney, then attorney’s discounted hourly rate was history such that the normal hourly rate before discharge was the measuring stick for a contractually-based fee award. The second infirm provision in a hybrid/contingency fee arrangement indicated that if client chose not to settle, then client had to pay hourly fees, but with an important exception--a bad faith termination of services to avoid paying the contingent fee resulted in attorney’s entitlement to the greater of the hourly rate payable under the agreement or compensation for services rendered at two times the attorney’s hourly rates. The appellate court agreed these provisions were unenforceable, but did not have to directly confront the issue because attorney did not try to give bite to these clauses.

     However, the Fleischman court was bothered by the disgorgement, a forfeiture which it did not believe should taint the hourly fees ex-attorney collected especially given he was not attempting to enforce the unlawful provisions. In essence, it found “the penalty was too harsh for the offense.” (Don’t comment on this, sports fans!)

     Well, once the disgorgement reversal occurred, it was not hard to understand that the factual underpinnings of the trial judge’s prevailing party decision in favor of ex-client had to be revisited. And, that is actually what happened--a remand to relook at the issue and determine if anyone prevailed, given that client lost some malpractice/fiduciary breach claims. However, $1.4 million went POOF!, some of it--$720,000--forever, and the remainder--$688,624 in fees--remanded for a later look-see.

Prevailing Party: Confusing Fee Recoveries By Multiple Parties On Multiple Contracts Requires Reversal, Affirmance, And Remand

 

Some Fee Recoveries Went POOF, Some Stayed, and Some Will Be Re-Done.

     Kirk v. Dimitri, Case No. D058758 (4th Dist., Div. 1 Nov. 13, 2013) (unpublished) was a multi-party case arising from a failed residential real estate venture in Fallbrook. Ultimately, a jury and then a court in an equitable trial entered various verdicts and legal findings both in favor of and adverse to various parties, resulting in an appellate imbroglio. The same thing happened on fee motions made pursuant to fee clauses in an operating agreement and various promissory notes, with parties winning some and losing some.

     As can be expected in a complex case, the appellate court reversed, affirmed, and remanded for further consideration some of the fee awards.

     One fee award was reversed because the prevailing party did not even bring claims against the adverse party. That saw a $350,000 fee award go POOF!

     A second fee award was affirmed because the prevailing party did prevail on contractual claims and achieved primary litigation objectives--a Hsu win to be sure.

     Other awards were reversed and remanded given the reversal of equitable offset findings which might impact the “mix” on who prevailed.