CALIFORNIA ATTORNEY'S FEES

Appeal Sanctions, Judgment Enforcement, Tort Of Another: Judgment Creditor Denied Contractual, Statutory, Or Tort Fees Where Thrust Of Dispute Involved Claim Under A Separate Contract Not Involving Judgment Debtors And Having No Contractual Fees Clause

Attorney Was Not A Party To The Judgment Collection Settlement Agreement And Defenses Asserted In An Answer Do Not Provide A Tort Of Another Damages Predicate; Appellate Sanctions Request Denied. 

            Bush v. Cardinale, Case No. A159689 (1^st Dist., Div. 4 Aug. 13, 2021) (unpublished) was a situation where a judgment creditor reaching judgments against and an agreement with certain judgment debtors, but then had to defend judgment creditor’s former attorney’s suit requesting a certain percentage of proceeds from the judgment creditor-judgment debtors’ settlement based on a separate contingency agreement among judgment creditor, attorney, and another attorney.  Attorney was not a party to the settlement agreement, and judgment creditor only alleged defenses in attorney’s action as a potential setoff.  Former attorney lost in her action, with no damages awarded to anyone.  However, judgment creditor requested attorney’s fees against former attorney based on the post-judgment enforcement statutes (CCP § 685.040), on the tort of another doctrine, and on a contractual fee provision under the settlement agreement.  The trial judge denied the fee requests.

            The 1/4 DCA affirmed.  The appellate court concluded former attorney’s action was too attenuated to be an “enforcement” action relating to the earlier judgments against judgment debtors, given that former attorney’s lawsuit did not challenge the prior judgments and did not challenge the settlement agreement, but only sought to enforce rights under a separate contingency fee agreement.  The “tort of another” doctrine did not succeed because judgment creditor did not allege any affirmative claims against former attorney (just answering) such that there were no damages which could be pled and proven under the doctrine.  Finally, the contingency fee agreement had no fees clause, with nothing in the settlement agreement indicating that former attorney was a party or third beneficiary to the settlement agreement. 

            Former attorney filed a frivolous appeal motion, but that request was denied because the case was convoluted and there was enough plausibility to some arguments given the uniqueness of the case circumstances. 

Tort Of Another: $250,000 Tort Of Another Fee Award, As Damages, Affirmed Because Substantial Benefit “Defense” Involves Consideration Of The Equities

Positive Gains Were Outweighed By Harm To Bank’s Reputation And Its Years Of Struggles With Regulators/Federal Criminal Prosecutors.

            The “tort of another doctrine” is a nuanced one allowing attorney’s fees to be awarded as damages in certain situations.  Fees under this doctrine may be mitigated by consideration of special benefits that the alleged tortfeasor brought to the positive side of the suing plaintiff.  Gateway Bank, F.S.B. v. Metaxas, Case No. A158793 (1^st Dist., Div. 2 June 3, 2021) (published) establishes that the special benefits “defense” is driven by equities, such that simply an arithmetic consideration of positive benefits must be balanced against negative benefits which can consist of both monetary and nonmonetary factors.

            What happened in this case is that defendant/appellant, the president and CEO of plaintiff Gateway Bank, was sued by the bank based on certain transactions with a third party (with that third party using Bank as a warehouse lender) after the bank ran into trouble in the Great Recession.  Appellant pled guilty to criminal bank fraud charges, with the Bank battling numerous regulator and federal criminal prosecutor efforts.  Eventually, some positive monetary gain came from the third-party transaction.  The Bank sued for fraud, fraudulent omission, and breach of fiduciary duty, winning these claims against appellant.  Then, on the capital loan transaction, an appointed referee found damages of $382,154, $250,000 being “tort of another” damages.  Appellant argued that the positive “special benefits” required a finding that tort of another fees should not be allowed.

            The First District, Division 2 rejected the challenge.  It found that the “special benefits” defense in the tort of another area was equitable based such that both monetary and non-monetary considerations should be evaluated, as they were by the referee.  Here, the positive side was outweighed by the harm to bank’s reputation, as well as expenditure of financial resources to battle regulators, federal criminal prosecutors, and indemnify appellant in certain actions. 

Tort Of Another: Cross-Defendants Could Not Pursue Fees Against Unsuccessful Cross-Complainant For Work Incurred Against Other Co-Cross-Defendants In The Same Action

Fourth District, Division Two Is Also Dismissing Settled Appeals, But Still Issuing Its Views In Appeals Dismissed Late In The Appeal Process Or In Appeals With Minimal Merits.

            CDFT Limited Partnership v. DKN Holdings, LLC, Case No. E067583 (4^th Dist., Div. 2 July 29, 2019) (unpublished) was a situation where one successful group of cross-defendants tried to recoup attorney’s fees from an unsuccessful cross-complainant for a breach of fiduciary claim for work incurred with respect to co-cross-defendants.  The basis for the fee request was the “tort of another” doctrine.  The Fourth District, Division 2 would have none of it, because the tort of another doctrine does not apply to the situation where a plaintiff (or, here, the cross-complainant) alleges damages by the joint negligence of co-defendants in the same action because it would be a total emasculation of Code of Civil Procedure 1021 in tort cases (the section allowing parties to really choose how they wanted to deal with attorney fee compensation in a bargained-for situation).  (See Gorman v. Tassajara Development Corp., 178 Cal.App.4^th 44, 80 (2009).)

            However, the unpublished opinion—in line with one co-contributor Mike saw in a non-fee opinion—offers some insights into the 4/2 DCA’s treatment of appellate parties who settle late into the process where the appellate court has “worked up the case.”  The 4/2 DCA is the only appellate court which issues a written tentative decision in advance of oral argument, although some divisions in the Second District are issuing shorter tentative written decisions handed out on the day of oral argument.  (In one recent case, the 2/1 DCA issued an oral tentative decision before the attorneys argued the matter.)  The appellate parties here, after reading the tentative decision, decided to settle and requested to dismiss their respective appeals.  The 4/2 DCA did so, but still issued its views on the issues given its perception that the dismissal requests were tardy in nature and that the appeals had minimal merit.  So, if you are going to settle in a 4/2 DCA appeal, you might want to do it sooner than later!

Tort Of Another: $794,379 In Tort Of Another Fees Awarded To Seller And Against Dual Agent/Agent’s Broker Was Reversed As A Matter Of Law

Tort Of Another Claim Had Been Stricken Earlier By A Different Judge And There Was No Indication Seller Actually Incurred Any Fees To Her Attorneys.

            Boykin v. He, Case No. A149020 (1^st Dist., Div. 2, January 31, 2019) (unpublished), was a very convoluted case considered on appeal by the First District, Division 2, in which a jury had determined that a buyer would be awarded specific performance in a residential sale transaction and that seller, who brought a cross-complaint against a dual agent and affiliated broker, should be awarded $350,021 if seller had to transfer the house to buyer or $17,500 if seller kept the house. The judge presiding over the trial then allowed seller to keep the house, as well as awarding her $350,021 and imposing tort of another fees against the agent and broker to the tune of $794,379 (inclusive of a multiplier), even though an earlier, different judge had stricken the tort of another claim from a case. Agent and broker were shocked, appealing.

            Good thing they did. The 1/2 DCA determined that only $17,500 was the proper damage award to seller because she kept the house, in line with what the jury said (not what the trial judge did). Because tort of another fees are damages (not classic fees claimed generally through a postjudgment motion), they were improperly awarded because the earlier judge had stricken them from the case—and a second judge cannot overrule what a first judge did. Tort of another fees have to be pled and proven, and they had been excised from the case. Beyond that, there was no proof that seller actually incurred any fees with respect to her attorneys. The appellate court firmly believed the trial judge acted inconsistently from the jury’s verdict and essentially overturned what a prior judge had done.

Tort Of Another: Buyer Alleging Joint Conspiracy Theory Could Not Recover Attorney’s Fees From Joint Tortfeasors, Real Estate Agent And Broker, Based On Tort Of Another Theory

Court Of Appeal Followed Vacco Industries’ Reasoning On This Issue.

            In 3405/3407 Slauson Ave., LLC v. Gilleron, Case No. B265290 (2d Dist., Div. 3 June 13, 2018) (unpublished), plaintiff buyer agreed to purchase 4 commercial property units from defendant buyer, with defendant real estate sales agent engaging in a joint broker arrangement with seller and buyer. Real estate sales agent apparently misrepresented the square footage of the properties, with buyer unable to obtain a purchase price adjustment. Buyer financed the property with a lender, who foreclosed after he stopped making payments. Buyer sued everyone in the chain based on a “joint conspiracy” theory.

            After settling with the seller’s estate, buyer did obtain significant compensatory damages and prejudgment interest against real estate sales agent and his affiliated broker. These defendants appealed (and lost), but buyer cross-appealed claiming that he should have been awarded attorney’s fees under the tort of another doctrine.

            Wrong, said the Court of Appeal. Buyer proceeded on a “joint conspiracy” theory, with it being clear that “tort of another” principles do not apply to joint tortfeasors such as the real estate agent and broker. The lower court’s refusal to award fees was affirmed, with the appellate court relying on the reasoning from Vacco Industries, Inc. v. Van Den Berg, 5 Cal.App.4^th 34, 57 (1992).

Tort Of Another: Trial Stipulation Did Not Adequately Preserve Tort Of Another Fee Recovery Request When It Only Talked About A Noticed Motion

Tort Of Another Is A Damages Phase Issue, Such That Any Renewal Was Too Prejudicial.

            Beeson v. Lion Connecticut Holdings Inc., Case Nos. A144542/A147993 (4^th Dist., Div. 1 mod. unpublished opinion Apr. 11, 2018; original unpublished opinion Mar. 14, 2018) dealt with a cross-appeal by a party cross-complainant challenging a lower court’s denial of its fees incurred in defending plaintiffs’ claims in the trial below based on a “tort of another” theory.  The real question relates to the language in this stipulation:  the parties stipulated that “Fireman’s Fund’s non-attendance of the testimony portion of the damages phase of trial w[ould] not prejudice Fireman’s Fund from seeking an award of attorneys’ fees and costs, which w[ould] be addressed by the Court upon properly noticed motion by Fireman’s Fund after the conclusion of the damages phase of trial.”

            Fireman’s Fund, in the cross-appeal, argued that this preserved its ability to recover “tort of another” fees against ING in the case.

            No way, said the 4/1 DCA.  The problem was that the stipulation only covered true attorney’s fees allowable by noticed motion, not fees awardable as damages on indemnity contracts (much like Brandt insurance fees).  If Fireman’s Fund truly wanted to obtain recovery of these fees, it likely had to participate in the damages phase but its election not to was dispositive.  Beyond that, it would be prejudicial to the other side to reopen this issue way past the truly “ripe” damages phase as far as obtaining a proper adjudication of the issue.

Tort Of Another: Plaintiff Art Gallery Owner Properly Awarded Attorney’s Fees Against Negligent Insurance Broker Under Tort Of Another Doctrine

Fees Awarded For Plaintiff’s Lawsuit Against Insurer To Protect Interest In Insurance Coverage Due To Broker’s Negligenc

            A jury found defendant insurance broker liable to plaintiff art gallery owner for damages resulting from an insurance carrier’s denial of a dealer fine art policy claim after plaintiff sued insurer and incurred fees in pursuing insurance coverage.  After the jury verdict, the trial judge awarded attorney’s fees incurred in pursuing claims against the insurance carrier (which settled), prompting an appeal by insurance broker in Koeppel v. John O. Bronson Co., Inc., Case No. H041697 (6^th Dist. Aug. 11, 2017) (unpublished).

            The Sixth District affirmed, after a discussion of the tort of another doctrine.  Although acknowledging that joint tortfeasors cannot utilize the tort of another doctrine, the appellate court did not find that this applied to the innocent plaintiff in these circumstances, finding persuasive the reasoning in Third Eye Blind, Inc. v. Near North Entertainment Ins. Services, LLC, 127 Cal.App.4^th 1311, 1316, 1325 (2005) when insurance coverage was involved and plaintiff sought to vindicate rights against the carrier—after all, the broker’s negligence forced plaintiff to sue the carrier.  With respect to the causation element of the tort of another doctrine, the Sixth District found that the substantial factor test approved in Mitchell v. Gonzales, 54 Cal.3d 1041, 1049-1054 (1991) was applicable. 

Tort Of Another: Does It Apply To Third-Party Litigation Involving Contracts Rather Than Torts?

Fifth District Concludes It Does, Sustaining A Supporting Superior Court Appellate Division Decision In The Cause Before It. 

            Although the facts were very convoluted, the Fifth District did confront the legal issue of whether the “tort of another” doctrine applies to contractual cases in State Center Community College Dist. v. American Property Holdings, LLC, Case No. F072306 (5^th Dist. Aug. 1, 2017) (unpublished).

            The appellate court decided that the doctrine did apply to appropriate contractual cases, validating the same result reached by the Los Angeles County Superior Court’s Appellate Division in De La Hoya v. Slim’s Gun Shop, 80 Cal.App.3d Supp. 6, 7-8, 10 (1978).  The Fifth District did endorse this extension to contract cases, observing that a “handful of federal and sister-state cases” have referred to De La Hoya “as exemplifying California law”—rejecting the proposition that it was inapt to contract cases.  The bottom line was that the litigant in State Center Community College (a community college district) properly relied on this doctrine in a contract case at the trial court level to garner a fee recovery of $581,335.91, plus the opportunity to reap some more fees for winning on appeal.

        COMMENT:  The key here is that, under the circumstances, the Court believed that damages in the form of attorneys fees incurred in third-party litigation were foreseeable.  Therefore, the case might be viewed as an application of the rule of Hadley v. Baxendale we learned in law school, namely, that consequential damages are those losses that the breaching party should have foreseen. 

Tort Of Another: $294,271 Attorney’s Fees Award Under “Tort Of Another” Doctrine Reversed As A Matter Of Law

 

Restrictions On Its Application Necessitated Reversal In This Case.

    As far as challenges to fee awards, we would have to say that challenges to awards under the “tort of another” doctrine have higher chances of reversal, based on the restrictions applicable to use of this doctrine. Los Angeles Community College Dist. v. Roosevelt Lofts, LLC, Case No. B266057 (2d Dist., Div. 4 Nov. 22, 2016) (unpublished) is a nice illustration of this general observation.

    There, appellant Roosevelt Lofts was found to have engaged in fraud in acquiring an easement from the District.  Subsequently, the trial judge awarded $294,271 in attorney’s fees to District and against Roosevelt Lofts under the “tort of another” doctrine for work associated with a bankruptcy proceeding, the underlying action (especially an appeal), and a quiet title against another party basically affiliated with Roosevelt Lofts.

    The 2/4 DCA reversed the fee award as a matter of law. 

    The “tort of another” doctrine is subject to these important restrictions:  (1) no recovery is permitted for fees incurred in litigation directed against the tortfeasor, even though other parties are incidentally involved; (2) no recovery is permitted for fees incurred in litigation involving a third party sharing the same interests as the tortfeasor; and (3) fees incurred in third party litigation may be recovered from a defendant only when that litigation is “the natural and probable consequence” of the defendant’s tortious conduct such as the third party’s independent conduct (a proximate causation requirement).  Application of these restrictions required reversal of the entire fee award, because (1) the pre-decision portion of the bankruptcy proceeding did not constitute an action against the affiliated third party but only insolvency battling with Roosevelt Lofts; (2) the first appeal work did not qualify because the affiliated third party was representing Roosevelt Loft’s interest in that appeal; and (3) post-appeal work pertained to the affiliated third party’s independent conduct for which Roosevelt Lofts could not bear “tort of another” fee exposure.

Tort Of Another: Property Seller Properly Awarded $195,008.32 In Attorney’s Fees Against Dual Brokers Under “Tort Of Another” Doctrine

 

Contractual/Statutory Fee Deadlines And Other Principles Did Not Apply.

    Lambert v. Francis, Case No. H041665 (6th Dist. Sept. 21, 2016) (unpublished) involved a long-standing case, with multiple appeals, between prevailing property purchasers and losing seller, with the seller eventually obtained equitable indemnity rights against dual brokers also sued in the overall case.  After purchasers garnered $262,905.50 in costs and attorney’s fees as prevailing parties against seller, seller then sought to recover attorney’s fees against brokers under the “tort of another” doctrine.  Seller won $195,008.32 in costs and attorney’s fees against the brokers, just about the full amount of the fee request.

    Brokers’ challenges to the fee award did not resonate on appeal.  Although raising procedural and substantive arguments premised on contractual/statutory fee awards, the appellate court observed that this case was different—costs and fees were sought as damages under the tort of another doctrine such that the deadlines and stay issues involving contractual/statutory fees did not apply in the tort of another “damages” context.  With respect to the amount of the fees, the amount was not shocking given there were 3 mediations, 3 dozen depositions, 9 expert witnesses called to testify at trial, and 11 days of trial.

Tort Of Another: About $270,000 In Fee Recovery Went Away Because Fees Not Authorized Under “Tort Of Another” Doctrine

 

Problem Was That Joint Tortfeasor Situation Will Not Justify Fees Under This Theory.

     Raicevic v. Lopez, Case No. D061253 (4^th Dist., Div. 1 Jan. 23, 2015) (unpublished) illustrates a principle that is important in this area of the law—“tort of another” fees will not be awarded in a multiple tortfeasor situation.

     What happened here is that plaintiffs won a total of $588,000 on intentional and negligent misrepresentation claims and then also obtained fee awards of about $270,000 against a couple of the tortfeasors. Well, that went away on appeal because the “tort of another” doctrine does not operate to confer fee recovery against some members in a multiple tortfeasor situation. (Gorman v. Tassajara Development Corp., 178 Cal.App.4^th 44, 80 (2009).)

Costs/Equity/Indemnity/Tort of Another: Individual Brokers Not Liable For Real Estate Seller’s Attorney Fee Exposure To Buyers, But Individual Brokers Face Exposure For Sellers’ Own Defense Attorneys Fees In Nondisclosure Lawsuit

Implied Contractual and Equitable Indemnity Theories Cannot Undermine American Rule.

​Dalton v. Francis, Case No. H033247 (6th Dist. June 26, 2014) (unpublished) involved a buyer lawsuit against seller and dual real estate agents for nondisclosures in connection with a residential sale regarding a dilapidated septic system. The problem was that seller and individual brokers negligently passed on information about the housebeing connected to a public sewer, but with the infirmities originating from broker conduct. Eventually, buyers won the suit and won contractual attorney’s fees of $262,909.50 against sellers. (The corporate brokerage business went bankrupt, so individual brokers were still involved.) However, the lower court also found that the buyers could get total reimbursement from individual brokers for buyers’ fee exposure to sellers based on an implied indemnity theory (likely, implied contractual indemnity). Later, the trial judge determined that seller recapture defense costs in the buyer lawsuit from individual brokers based on the tort of another doctrine.

​Sellers appealed, getting some relief on appeal.

​The lower court’s determination that the $262,909.50 pro-buyers fee award could not be "passed" through by sellers for reimbursement from the individual brokers. The reasons: (1) implied contractual indemnity--individual brokers were not parties to the listing agreement with sellers (only the bankrupt brokerage business was a party); and (2)equitable indemnity—although brokers were jointly and severally liable with sellers as far as buyers’ damages, this theory could not be used to create a new attorney fee exposure basis under the American Rule, or else the appellate court would be creating a new exception through judicial fiat.

​Then, what about sellers being able to recoup defense fees in the suit against individual brokers? Well, the tort of another doctrine did work as an exception to the American Rule and did provide a basis for fee recovery under this doctrine. (Gray v. Don Miller & Associates, Inc., 35 Cal.3d 498, 507 (1984).)

​Finally, individual brokers balked at some nonstatutory costs claimed by sellers under the tort of another doctrine. However, the appellate court determined they were proper "damages," in line with what the trial judge found.

Posted with Blogsy

Tort Of Another: Recent 4/3 DCA Decision Acknowledges Conflict With Other DCA Decision In Modified Opinion Upon Rehearing Denial

 

“No Tort” Holding Is Not Unanimous Among DCAs.

     On May 2, 2014, we posted on Mega RV Corp. v. HWH Corp., a 4/3 DCA opinion holding that the absence of a tort meant attorney’s fees could not be awarded under the “tort of another” doctrine. In denying a rehearing request, this decision has now been modified to show there is a conflict among intermediate appellate courts on the issue: “Like Sooy v. Peter [1990] 220 Cal.App.3d [1305] at pages 1311-1312, we disagree with the majority opinion in Manning v. Sifford (1980) 111 Cal.App.3d 7, 10-11, wherein the court suggested it could award tort of another damages even if no tort duty existed.” In this regard, Mega RV Corp. also sided with Justice Blease’s dissent in Manning.

Tort Of Another: Appellate Court Reverses $166,000 Damages Under Tort Of Another Doctrine Based On Lack Of A Predicate Tort

 

Retail Mobilehome Seller Owes No Independent Tort Duty To Component Part Manufacturer.

     Justice Ikola, on behalf of the Fourth District, Division 3, has penned an interesting decision in Mega RV Corp. v. HWH Corp., Case No. G047718 (4^th Dist., Div. 3 Apr. 30, 2014) (published) in the Song-Beverly Consumer Act area. In the part for which we blog, the appellate court ordered stricken the award of $166,000 in damages under the tort of another doctrine.

     Briefly told, plaintiffs filed a complaint against a mobilehome retailer seller, the mobilehome manufacturer, and the financing company for defective hydraulic systems in the mobilehome. However, manufacturer had an involuntary bankruptcy filed against it, with retailer seller worried that its defense costs in the suit would not be picked up by someone else. It devised the strategy of adding a component part manufacturer to the lawsuit in order to obtain indemnification and a defense, a strategy which backfired. The trial court concluded component manufacturer was not required to indemnify manufacturer and also awarded $166,000 in damages to component manufacturer in the form of defense attorney’s fees under the tort of another doctrine.

     The appellate court affirmed the no indemnification ruling, but deleted the $166,000 in damages against mobilehome manufacturer under the tort of another doctrine.

     After an eloquent discussion of the law resulting in the conclusion that the component manufacturer will not face exposure for economic loss to the consumer or retail seller unless an express warranty is provided, the appellate court turned to the tort of another ruling. The problem here was that no tort existed, because the manufacturer owed no duty to the component manufacturer under the circumstances. No tort; no tort of another doctrine. In a footnote, Justice Ikola also explained why tort of another doctrine is not a particularly relevant doctrine in cases involving physical injury or property damage because, otherwise, the American Rule that each party bears its own fees/costs in tort cases would be vitiated. (Slip Op., p. 25, fn. 17.)

Insurance/Tort Of Another: Misrepresenting Insurance Broker Properly Hit With Attorney’s Fees Under Tort Of Another Doctrine With Respect To Insurer’s Winning Cross-Complaint

 

Broker Also Liable To Insured for Fees Under Tort of Another, But Matter Had To Be Reconsidered Given Reversal Of Judgment In Favor Of Insured And Against Insurer.

     De La Torre v. Century Surety Co., Case No. D061028 (4^th Dist., Div. 1 Feb. 24, 2014) (unpublished) was tripartite litigation involving insured versus insurer, and insurer cross-complaining against insurance broker who was claimed to have made false statements leading to issuance of the policy. The case involved a restaurant insured’s bad faith denial claim against an insurer after insured sustained property loss from a fire breaking out in a back kitchen when a pot of oil was left unattended over an open flame burner. Insurer denied the claim based on the argument that restaurant did not have an automatic fire extinguishing system over the back cooking area as required by the policy terms and conditions. Although a trial court made some interim rulings and a jury returned a verdict in favor of insured, the appellate court reversed the judgment against insurer on various grounds. Broker was found liable for misrepresentation under insurer’s cross-complaint. Both plaintiffs and insurer were awarded attorney’s fees as against broker.

     Broker’s separate appeal did not change the result, because the tort of another doctrine was found applicable as a basis for the fee recovery, as damages, by both insurer and plaintiff. (Gray v. Don Miller & Associates, Inc., 35 Cal.3d 498, 504 (1984); Third Eye Blind, Inc. v. Near North Entertainment Ins. Services, LLC, 127 Cal.App.4^th 1311, 1325 (2005).) In trying to defeat insurer’s fees recovery, broker argued that CCP § 1021.6 (fee recovery in implied indemnity actions) applied to the tort of another doctrine—a contention rejected because insurer had no implied indemnity claims. (Burger v. Kuimelis, 325 F. Supp.2d 1026, 1041-1043 (N.D. Cal. 2004).) However, because the insurer was ultimately found not liable, the fee award to insured had to be reversed to determine if the broker was still on the hook for them on remand.

     BLOG OBSERVATION—This one brings back interesting teenage memories for co-contributor Mike, whose sister caused substantial property damage to the kitchen stove when she failed to monitor a pot of popcorn oil being heated up while she was applying her makeup in a bathroom down the hall. Mike’s mom was not happy when she came home from work, dryly observing “I can’t believe it, she burned up my stove.”

Tort Of Another: Pleadings For Fee Recovery Properly Jettisoned Where Defendants Sought To Recoup Fees Expended To Defend Their Own Wrongdoing

Very interesting, but not funny.

     In Kayne Anderson Private Investors v. Colak, Case No B239111 (2d Dist., Div. 2 May 16, 2013) (unpublished), plaintiffs got hit with a multimillion arbitration award based on breaching a Stock Purchase Agreement representation/warranty by providing inaccurate information (although not being found liable for fraud). A CEO of one of the parties in the arbitration was found to be credible by the arbitrator.

     Plaintiffs then attempted to sue CEO defendant in court, claiming equitable indemnity and attempting to recoup arbitration defense costs under the “tort of another” doctrine.

     The lower court eventually granted a demurrer without leave with respect to plaintiffs’ action against CEO.

     All the lower court orders were sustained. Although recognizing that “tort of another” is an exception to the American rule for fee recovery, the appellate court found that it did not apply in the context where plaintiffs (as defendants in the arbitration) were attempting to recoup fees and expenses incurred in defending against defendants’ own wrongdoing. (Davis v. Air Technical Industries, Inc., 22 Cal.3d 1, 6 (1978); Santa Clara Valley Water Dist. v. Olin Corp., 655 F.Supp.2d 1048, 1063 (N.D. Cal. 2009).)

 

Topsy turvy:  The Barnum and Bailey greatest show on earth--L'Auto Bolide thrilling dip of death--M'lle Mauricia de Tiers, the fearless, young and fascinating Parisian, in a dreadful, headlong leap, loop and topsy turvy plunging somersault with an automobile . . .    c1905.  Library of Congress.

Tort Of Another: Plaintiff Defeating Usury Counterclaim Entitled To Fees Under This Doctrine Against Unlicensed Broker, Because Proof Of Broker’s Conduct Needed To Defeat Usury Claim

 

     Plaintiff won contract/tort claims arising from loans made to a deceased person brokered by an unlicensed broker who happened to be a trustee of the deceased person’s trust. The win included defeating a usury counterclaim brought by the estate. The lower court then found that plaintiff was entitled to attorney’s fees as additional damages against broker under the “tort of another” doctrine.

     Broker claimed on appeal that the doctrine was an “exceptional one” that should not apply under the circumstances.

     Wrong, said the appellate panel in Gates v. Courneen, Case No. H038069 (6th Dist. Mar. 18, 2013) (unpublished). Although it is true that the doctrine should not be applied indiscriminately, this was hardly that type of situation: after all, plaintiff did have to expose broker’s conduct/unlicensed status in order to defeat the usury counterclaim, which squarely fit into the rationale behind the “tort of another” doctrine.

Allocation/Section 1717/Tort of Another: $477,031 Attorney’s Fees Award Affirmed In Real Estate Purchase Appeal Where Both Sides Appealed

 

No Prejudice In Arguing All Defendants Should Be Liable/Failure to Claim Tort of Another Fee Damages At Trial Dispositive Against Fee Petitioner.

     DeSantis v. Oakmont LLC, Case No. A128220 (1st Dist., Div. 5 Dec. 7, 2012) (unpublished) is a wild case on appeal involving parties suing over a failed real estate transaction, with attorney’s fees being awarded against former owner/seller to the tune of $477,031. Everyone appealed on multiple grounds; but, ultimately, the matter got affirmed across the board.

     With respect to the fee recovery, the appellate court was not sympathetic to winner's claim that fees should be assessed against all three defendants, not just the LLC owner.  Where is the prejudice, said the reviewing court? Winner did not show how a multiple defense judgment would have produced any additional pecuniary benefit such that winner was aggrieved on appeal. Beyond that, the only real theory was tort of another, but winner did not present proof as damages during the chief-in-case, which meant the damages (fee) claim was waived.

     The trial court’s reduction of requested fees by 10% was not error, because its decision to apportion out work for other defendants was not unreasonable at all. (Cruz v. Ayromloo, 155 Cal.App.4th 1270, 1274, 1277-1278 (2007).)

Appeal/Apportionment/Damages/Tort Of Another: $330,000 Fee Award To Winning Plaintiff Remanded To Apportion Work To Clearing Title Tasks

 

Slander of Title Work Needs to be Apportioned Out; No Fees For Appellate Work.

     Defendant in Johnson v. Grayson, Case No. G044975 (4th Dist., Div. 3 June 22, 2012) (unpublished) lost a quiet title case (also having a slander of title claim), but appealed a $330,000 adverse fee award grounded on the tort of another doctrine. The main argument on appeal was that the fee award failed to differentiate between fees incurred to actually quiet title (recoverable under tort of another or to remove title disparagement itself) versus fees to prosecute the slander of title damages claim (not recoverable according to the defendant).

     Our local appellate court, in a 3-0 unpublished decision penned by Acting Presiding Justice Rylaarsdam, agreed that the requested apportionment needed to be made.

     Based on Seeley v. Seymour, 190 Cal.App.3d 844, 866 (1987), defendant was right that fees were only recoverable to clear title/disparagement but not recoverable as far as seeking slander of title damages. Given that almost all the requested fees were awarded and nothing indicated apportionment was impossible, the fixing of fees had to be remanded for further recalculation.

     Plaintiff, however, argued that he was entitled to fees on appeal given that he did defeat the merit challenges to the underlying relief granted in his suit. No, because the reasoning in Burnaby v. Standard Fire Ins. Co., 90 Cal.App.4th 787, 795-796 (1995) was persuasive in showing that fees on appeal are not allowed even though they were an element of damages in a quiet title or slander of title action below.

Private Attorney General/Insurance/Requests For Admissions: Insured Prevailing In Auto Insurer Action Properly Denied Fees Where No Large Class Of People Benefited And Plaintiff Failed To Allocate Fees Between Policy Benefit Work/Work Incurred In Proving

 

Lack of Allocation Was Fatal for Brandt and RFA Issues.

     Insured prevailed in a suit against auto insurer for making repairs rather than declaring the car a total loss. However, insured was denied requested fees of $500,000 ($250,000 plus a 2 multiplier) even though claiming them under one of three theories: (1) California’s private attorney general statute (CCP § 1021.5); (2) recouping policy benefits under Brandt v. Superior Court, 37 Cal.3d 813, 817 (1985); and (3) fees incurred to prove up facts that were denied by insurer in requests for admissions (CCP § 2033.420).

     The fee denial was affirmed in Benning v. Wawanesa Gen. Ins. Co., Case No. D058442 (4th Dist., Div. 1 Apr. 26, 2012) (unpublished).

     The first ground--CCP § 1021.5--was not satisfied because the insured’s win did not benefit a large class of people or the general public.

     The second ground--Brandt policy benefit fees--failed because insured sought compensation for all work, not making an allocation which was insured’s burden under Cassim, a post-Brandt case clarifying contingency fee recovery in these situations. (The Rutter Group treatise recommends to practitioners that an accounting allocation is necessary to separate true Brandt fees from nonrecoverable bad faith/tort fee work.)

     The third ground--CCP § 2033.420--did not justify fees, again, because of insured’s failure to allocate fees only to the work needed to prove up facts at trial from denied RFAs. Again, the lack of allocation was fatal because the fee request did ask for reimbursement for time occurring well before the RFAs were denied.

     If there is a practice tip emanating from this decision, it is that winning plaintiffs need to allocate time to recoverable tasks when claiming fees under Brandt or the RFA costs-shifting provision.

Tort Of Another: Because Slander Of Title Was Not Pled Nor Proven, No Basis For Applying The Doctrine

 

Fee Denial By Trial Court Was Correct.

     In a long unpublished decision that is good reading for practitioners involved in a prescriptive easement dispute, a trial court ultimately concluded that the plaintiffs owned a fee simple interest in a 40-foot strip of land running along the eastern boundary of their property and that adjacent defendant landowners had a prescriptive interest in the strip as a path for foot traffic (not a prescriptive easement as a road for vehicular traffic).

     However, the trial court denied awarding any requested attorney’s fees to plaintiffs although they did prevail to some extent (and maybe more than defendants).

     The fee denial decision was affirmed in Scheel v. Henderson, Case No. C062704 (3d Dist. Feb. 7, 2012) (unpublished).

     Plaintiffs staked their fee request upon the “tort of another doctrine,” which we have a separate category for that can be searched on our home page.  Even though expense of clearing title is a proper element of damages in a slander of title action so as to invoke the doctrine (Glass v. Gulf Oil Corp., 12 Cal.App.3d 412, 438 (1970)), plaintiffs’ problem was they did not plead it and did not prove a slander of title claim because there was no publication and the one communication was privileged in nature.

     BLAWG BONUS:      The co-contributors to this blawg, William M. ("Mike") Hensley and Marc Alexander, have published an article about attorney's fees as damages in California Litigation, the Journal of the Litigation Section, State Bar of California, Volume 21, Number 3, 2008, an all-theme issue devoted to the subject of "Damages."  For a link to our article, see our November 13, 2008 post.

Tort of Another: No Negligence Finding Precluded Application Of “Tort Of Another Doctrine”

Third District Provides Useful Reminder

     The Third District, in Dupre Ins. Services, Inc. v. Hall, Case No. C066073 (3d Dist. Jan. 5, 2012) (unpublished), reminds us that the “tort of another” theory of fee recovery cannot work where the party being charged under this theory is found to have been not negligent. There was simply no tort committed, which means the doctrine cannot apply.

Special Fee Shifting Statute And Tort Of Another: Settlement Confirmed As Good Faith Settlement Because Settling Party Had No Indemnity Fee Exposure Under Health and Safety Code Fee Provision Or Tort Of Another Doctrine

 

$1.5 Million Fee Exposure Was Nonexistent Such That Indemnity Rights Issue Did Not Impact Good Faith Settlement Analysis.

     In PacificCare of California v. Bright Medical Associates, Inc., Case No. G041507 (4th Dist., Div. 3 Sept. 2, 2011) (certified for publication), Acting Presiding Justice Aronson affirmed a good faith settlement determination after deciding on behalf of a 3-0 panel that there were no attorney’s fees indemnity considerations in light of the fact there was no fee exposure under a special fee-shifting provision or the “tort of another” doctrine.

     Plaintiffs sued PacificCare when their mother died while seeing out-of-network treatment for a cerebral aneurysm. PacificCare cross-complained against cross-defendant Bright Medical, the healthcare provider who contracted with PacificCare to deliver medical services to PacifiCare subscribers. Bright settled with plaintiffs for $300,000 subject to a good faith determination, which was granted along with a dismissal of the cross-complaint. PacifiCare challenged the good faith settlement determination as erroneous because Bright had indemnity liability to PacifiCare for $1.5 million in attorney’s fees incurred by PacifiCare in opposing plaintiffs’ claims, meaning the $300,000 settlement was disproportionately low.

     The good faith settlement determination was affirmed.

     The reason was the Court of Appeal’s determination that PacifiCare had no viable attorney’s fees claim against Bright. Although indemnity exposure to a nonsettling defendant is certainly a factor to be gauged in the good faith determination calculus, PacifiCare could not recover fees under Health and Safety Code section 1371.25 given that the statutory provision’s first sentence prevented plaintiffs from holding PacifiCare vicariously liable for Bright’s conduct or for recovering the attorney’s fees PacificCare incurred in its defense of plaintiffs’ claims. Also, even if PacifiCare did share joint liability for mother’s health care (which it did not), the fees claims under the “tort of another” doctrine failed because the doctrine only applies when the party seeking fees bears no fault, which could not occur under PacifiCare’s joint liability theory.