CALIFORNIA ATTORNEY'S FEES

Equity, Section 998: Nonprevailing 998 Offeree Saddled With $ 33,198.06 In Costs After Rejecting $7,500 998 Offer Not Beat Following Jury Trial

 

Plaintiff Only Recovered $2,229, And CCP § 473 Relief Did Not Resonate.

     We have to say that in pro per plaintiffs need to beware when confronted with CCP § 998 offers—even though our courts are open to all, in pro per representation is fraught with perils, as Jones v. Pierce, Case No. A139665 (1^st Dist., Div. 2 June 30, 2015) (unpublished) illustrates.

     In this one, plaintiff sued for negligence arising from a vehicle accident, but rejected a $7,500 998 offer from defendant. However, plaintiff only recovered $2,229 after a jury trial. The trial judge awarded 998 fee-shifting costs of $33,198.06, after plaintiff failed to timely move to tax costs but making a request for mercy under CCP § 473.

     Didn’t resonate with the appellate court. The failure to file a motion to tax costs constitutes a waiver of the right to object to a costs bill. (Douglas v. Willis, 27 Cal.App.4^th 287, 289-290 (1994).) In order to counteract this obvious waiver, plaintiff tried to use the section 473 escape valve because he did not have an attorney. However, this bad assumption of risk did not work—“when a litigant accepts the risks of proceeding without counsel, he or she is stuck with the outcome, and has no greater opportunity to cast off an unfavorable judgment than he or she would if represented by counsel.” (Hopkins & Carley v. Gens, 200 Cal.App.4^th 1401, 1413 (2011).)

Equity: Seventh Circuit Court Of Appeals Nixes Terminated Attorney’s Attempt To Obtain Fees For Cases Settled After His Termination

 

Case Revolved On Meanings Of “Generated” And “Received.”

     An attorney working on medical malpractice cases felt cheated when it received no “bonus” compensation after the cases settled well after his termination from the handling law firm. Unfortunately for him, he lost his bonus claims after years of litigation.

     The Seventh Circuit Court of Appeals in Hess v. Bresney, No. 14-1921 (7^th Cir. May 4, 2015) (precedential) held that the key dispute was contractual in nature, depending on what fees “generated” and fees “received” meant. Terminated attorney’s failure to adduce extrinsic evidence was dispositive because the fees came way after his termination so that they could not be classified as true “bonuses.”

     However, here is a great quote from the case we liked: “By reading ‘generated”’ synonymously with ‘received,’ this formula for bonus compensation is straightforward and easy to apply. It is so easy, in fact, that even a group of lawyers could figure it out. Cf. Jackson v. Pollion, 733 F.3d 786, 788 (7th Cir. 2013) (‘Innumerable are the lawyers who explain that they picked law over a technical field because they have a “math block ... .”’).”

Equity: Due Process Strikes Again—Fee Award By New Judge After Retired Judge Only Awarded Costs Had To Be Stricken On Due Process Grounds

 

Civil Harassment Proceeding Was the Context

     Due process, due process, that concept drove the striking of an attorney’s fees award in a civil harassment proceeding context.

     In Bridges v. Smith, Case No. C074704 (3d Dist. Feb. 23, 2015) (unpublished), plaintiffs were granted a 5-year civil harassment restraining order to stop defendant’s alleged harassment of them under CCP § 527.6, along with costs. The judge making these rulings retired, and the new judge confirmed his rulings but also granted plaintiffs $5,050 in fees under the civil harassment fee-shifting statute.

     The appellate court determined that the new judge could not enter a judgment with the additional fee recovery—after all, the retired judge didn’t do it and due process was a “stickler” dictating the result in defendant’s favor.

Equity, Section 1717: Plaintiff Losing Shareholder Derivative Claim Liable For Defense Attorney’s Fees

 

Reciprocity Required Under Section 1717, Given Unfairness of Other Result.

     In Trejo v. Arriaga, Case No. D064410 (4^th Dist., Div. 1 Jan. 21, 2015) (unpublished), plaintiff 50/50 shareholder in a closely-held corporation lost an amended shareholder derivative lawsuit against defendant 50/50 shareholder. Defendant nonsuited plaintiff based on a failure to prove damages. Defendant then sought to recover fees under a lease agreement with a fees clause, garnering $55,608 in attorney’s fees under Civil Code section 1717.

     The appellate court affirmed. Plaintiff contested that he could be individually liable for fees in a derivative action, but California decisions have allowed such recovery under the “substantial benefit doctrine” based on principles of equity. (Brusso v. Running Springs Country Club, Inc., 228 Cal.App.3d 92, 99-100, 111 (1991).) Given that plaintiff initiated the derivative lawsuit with presumed knowledge of the risk that he might be liable under the lease provisions if he lost, the reviewing court found it would be inequitable to prevent defendant for being able to recover attorney’s fees.

Bankruptcy/Equity/Sanctions: Fee Recovery Affirmed And Reversed In Part In Case Involving Federal Work and Vexatious Litigant Orders

 

Some Should Have Been Sought In Federal Court, But Vexatious Litigant Sanctions And Addition Of Attorney As Judgment Debtor, Who Assisted Vexatious Litigant, Was Proper.

     Kempton v. Clark, Case No. B248713 (2d Dist., Div. 2 Sept. 25, 2014) (unpublished) is a real imbroglio involving bankruptcy adversary and state court proceedings in which vexatious litigant orders and fee recovery orders were entered, eventually with an attorney for a vexatious litigant being added as a judgment debtor for purposes of certain vexatious litigant sanctions rulings.

     The appellate court affirmed and reversed some of these orders.

     Without getting into excruciating specifics, the reviewing court found that the superior court erroneously awarded certain fees for federal court (bankruptcy adversary) work, finding the power to do so rested with the federal court. (Charlie Y., Inc. v. Corey, 446 B.R. 384, 391-393 (9^th Cir. BAP 2011).) The appellate court did affirm orders adding an attorney as a “judgment debtor” to vexatious litigant sanctions orders after finding he was the real power behind the throne as far as liability.

Deadlines/Equity/SLAPP: SLAPP Motion Fee Grant Order Was Not Timely Appealed

 

Also, CCP § 473 Motion to Vacate Denial Order Was Timely, But Mandatory Relief Not Available And Discretionary Relief Properly Denied For Lack Of Diligence.

     Grinberg v. Kalili, Case No. B245899 (2d Dist., Div. 4 Sept. 10, 2014) (unpublished) originated as a dispute over the suitability of a $158,000 Ferrari, with the plaintiff losing and then being exposed as a defendant, in tandem with his attorney as a co-defendant, in a malicious prosecution suit by the Ferrari prevailing litigant. Defendants in the malicious prosecution successfully SLAPPed malicious prosecution plaintiff, obtaining a judgment for costs and for ______ in fees which was served on October 29, 2011. Later, one of the winning SLAPP defendants (the former suing Ferrari plaintiff) requested $55,615 in mandatory SLAPP fees, but the lower court only awarded $43,237.50 on an unopposed motion at a March 20, 2012 hearing, which order was entered on May 8, 2012. Then, about five months after the fee hearing, the attorney’s fees loser moved to vacate the fee order under CCP § 473. The lower court denied that motion on November 9, 2012, with loser appealing all orders/judgments “under CCP § 904.1(a)(3)-(13)” on December 19, 2012.

     The SLAPP merits appeal was untimely—it was one year too late, with the motion to vacate not extending the time for an appeal.

     Because the fee loser did timely appeal the motion to vacate under § 473, that did extend the time to appeal the fee order itself. However, CRC 8.108 has an important “earliest date” trigger—30 days after notice of entry of the motion to vacate order (something not at play, because no notice of entry was given) or 90 days after the motion to vacate was filed or 180 days after entry of the fee order. That last segment rendered fee loser’s appeal of the fee order untimely, because 180 days from the entry of the fee order expired on November 4, 2012 such that the December 19, 2012 appeal was too late.

     That took the reviewing court to the timely appeal of the denial of the motion to vacate the fee order under § 473. Fee loser’s attorney tried to “fall on the sword,” but the appellate court found mandatory relief was not available because the denial order was not a default or a default judgment. (Vandermoon v. Sanwong, 142 Cal.App.4^th 315, 321 (2006).) As far as discretionary relief was at issue, the lower court found that fee loser’s attorney did not adequately explain why five months elapsed from the date of the fee hearing to the date of the filing of the motion to vacate—put another way, no adequate diligence was shown on why relief was not sought earlier. Bottom line, $43,237.50 fee order remained intact.

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.

Allocation/Equity/Trade Secrets: Where Default Judgment Reversed For 3 Out Of 4 Defendants, Attorney’s Fees Had To Be Revisited Although Fourth Defendant Conceded Liability.

 

Complaint Prayer Gave Notice, But Fee Amount “Re-do” Necessary on Remand.

     In Lawson-Hawks Ins., Inc. v. McVey Ins. Broker, Inc., Case No. H038466 (6^th Dist. July 22, 2014) (unpublished), plaintiff sued four defendants (an insurance agency, an insurance brokerage company, and certain agents) for willful violation of trade secrets. Plaintiff obtained a default judgment of $25,000, plus $144,103 in attorney’s fees under Civil Code section 3426.4 (a fee shifting statutory provision applicable in trade secret cases), and $16,497 in costs.

     On appeal, three of the four defendants obtained a reversal because no claim was stated against them. However, the broker defendant conceded the $25,000 judgment was proper. So, what happened to the $144,103 fee award? Broker defendant argued it was invalid because inadequate notice was provided of it through the complaint prior to default, but the appellate court found the complaint prayer for “fees as authorized by statute” sufficed to provide the necessary due process notice. However, given that the fee award involved work for all four defendants, the amount of the fee award was remanded for a “re-fix” as to the broker defendant alone.

Equity: Not Returning Unused Legal Fees May Not Be Subject To One-Year “Malpractice” Type Statute Of Limitations, Certainly Not Something To Be Resolved On Demurrer

 

Get Beyond the Pleadings, 4/3 DCA Says.

     Lee v. Hanley, Case No. G048501 (4^th Dist., Div. 3 July 15, 2014) (published), authored on behalf of a 3-0 panel by Justice Moore, basically found that the one-year statute of limitations in CCP § 340.6 did not necessarily apply to a situation where an attorney was alleged to have failed in returning unused attorney’s fees to an ex-client when the case was concluded. Was this action in the performance of legal services or was this more akin to extraordinary “stealing” (conversion) actions? Well, the future performance of services made this a situation where the pleadings alone could not determine whether the action was time-barred, so the lower court’s dismissal at the pleading stage—based on the SOL—was reversed in this one.

Low resolution jpg not suitable for commercial reproduction, available from Wikipedia.

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.

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Appealability/Equity/Sanctions: In Pro Per Litigant Denied $31,000 In Compensatory Legal Fees When Trial Judge Discretionary Granted Relief From Default

Lower Court Did Not Err In Directing That $1,000 Penalty Be Paid By Party Requesting Default Relief to Superior Court Instead.

​In Sanai v. Pfeiffer, Case No. B246349 (2d Dist., Div. 4 June 26, 2014) (unpublished), an in pro per attorney sued an ex-client defendant for $149,240 in legal fees. However, the defense filed a notice of vexatious litigation and requested a dismissal, erroneously relying on a prior vexatious litigant order which had been stayed by the Court of Appeal earlier. Attorney kept filing requests for entry of default, which ex-client opposed through ex parte applications—with the lower court eventually granting the default request but simultaneously granting ex-client’s request for relief from default based on surprise pursuant to the discretionary provisions of CCP § 473(b)—hinged on the idea that the adverse party might think the vexatious litigant order was alive and well (especially given the party was represented by counsel who did not advice otherwise).

​Then, attorney filed a motion for compensatory legal fees, costs, and sanctions under section 473(b)-(c). Attorney should $39,000 in legal fees, $2,840.50 in out of pocket costs, and $1,000 in sanctions from both ex-client’s counsel. Attorney and ex-client reached a settlement calling for payments over time on the agreed settlement amount for the fee receivable but that attorney could continue proceed against ex-client’s attorney. The lower court held that attorney was entitled to recover costs in the amount of $440.50 and ordered ex-client’s attorney to pay $1,000 to the superior court, but denied the $31,000 fee request. Attorney filed a dismissal with prejudice pursuant to the settlement agreement with ex-client. Attorney appealed the denial of fees and sanctions against ex-client’s attorney.

​The lower court’s rulings were affirmed on appeal. First, the voluntary dismissal did not retard appeal of fee/sanctions order because the dismissal was done to expedite an appeal. (Stewart v. Colonial Western Agency, Inc., 87 Cal.App.4th 1006, 1012 (2001);Goldbaum v. Regents of Univ. of Cal., 191 Cal.App.4th 703, 708 (2011).) Next, the $31,000 fee denial was no abuse of discretion because, under analogous cases, the Tropeprohibition should also apply under CCP § 473’s discretionary provisions barring an in pro per attorney from recovering legal fees as sanctions. (Cf. Musaelian v. Adams, 45 Cal.4th 512, 519 (2009) [CCP § 128.7 case].) Last, ordering the $1,000 penalty paid by ex-client’s attorney to the superior court, rather than counsel, was no error given the wide range of relief available to the trial judge under section 473.

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Equity/Lodestar/Multiplier/Retainer Agreement: $7.8 Million Fee Recovery For Well Known L.A. Attorney’s Work In Divorce Cases Reversed

 

No Written Retainer Agreement, With Quantum Meruit Jury Verdict Overturned And Reduced To $1.8 Million Plus Some Other Deductions.

     This is a doozy of a case involving well known Los Angeles attorney Hillel Chodos, who happened to not have had a written hourly or contingency retainer agreement with an ex-client, a wife involved in an imbroglio of divorce cases (including a Marvin suit). Mr. Chodos charged $1,000 an hour for his time but had to sue ex-client for quantum meruit recovery based on the absence of a retainer and had a jury award him $7.8 million, his lodestar of 1,800 hour for the divorce work plus a multiplier of five—meaning the jury increased his hourly rate to $5,000. Such a result came after a trial where Mr. Chodos and his ex-client put on very conflicting testimony about the value of his services, the time he spent (or should have spent), and the results obtained in the divorce cases (although the results appeared to be quite extraordinary).

     The Second District, Division 5, in a 3-0 opinion authored by Justice Mosk, reversed and remanded in Chodos v. Borman, Case No. B252446 (2d Dist., Div. 2 June 18, 2014) (published).

     The appellate court determined that it was erroneous for the lower court to have instructed the jury on the availability of a multiplier in these circumstances. In this instance, Mr. Chodos did not bear true contingency risk because there was an hourly arrangement even under a quantum meruit theory. Because quantum meruit theory is fundamentally equitable in application (although legal for purposes of the right to a jury trial), the reviewing panel simply found it would be unfair to allow Mr. Chodos to obtain a recovery in excess of the lodestar.

     This result was buttressed by the panel’s belief that Mr. Chodos would be rewarded for violating Business and Professions Code provisions requiring a written retainer agreement. “Therefore, to reward attorney for not complying with the laws requiring written fee agreements would be inequitable and contrary to public policy.” (Slip Opn., p. 28.)

     Although not said in the opinion, we believe the appellate court actually took matters in its own hands to avoid further litigation. Based on Mr. Chodos’ testimony about 1,800 hours and a $1,000 hourly rate, it reduced the judgment from $7.8 million down to $1.8 million, with further deductions of about $132,000 to the $1.8 million figure (remanding to the lower court with instructions to enter this judgment).

     BLOG OBSERVATION—Especially in the punitive damages area, California appellate courts often will simply reduce an excessive award and direct the trial court to enter judgment based on such a reduction—doing this frequently in cases where it divines that the parties will only litigate for years more if a completely new trial is granted. For an example, see a case co-contributor Mike was involved with many years ago, Las Palmas Associates v. Las Palmas Center Associates, 235 Cal.App.3d 1220 (1991).

Appealability/Equity: Appellate Court Reverses Adverse Fee Judgment Based On Parties’ Settlement Stipulation

 

No Public Policy Concerns Militate Against Honoring Parties’ Settlement.

     In GMAC Mortgage v. Sandoval, Case No. E059111 (4^th Dist., Div. 2 Apr. 8, 2014) (unpublished), lenders won a declaratory relief action with respect to lien priority and were awarded attorney’s fees of $21,284.25 based on a trust deed fees clause. Defendants appealed only the postjudgment fee order, but later reached a post-appeal filing settlement stipulation with plaintiffs through which only the fee order (not merits judgment) would be vacated, if the appellate court agreed.

     It did. Although the appeal could not be dismissed, the appellate court did agree to reverse the fee award based on the parties’ settlement—finding that the policy favoring settlement was fostered while there was no prejudice to the adverse parties/erosion of public trust. (Code Civ. Proc., § 128(a).) The merits judgment remained in place, but the fee award was reversed.

Appealability/Equity: Reversal Of Judgment Against 66 Plaintiffs, 61 Of Which Appealed, Meant Fee Award Against All Gets Reversed

 

Otherwise, 5 Nonappealing Parties Would Get Stuck With Substantial Fee Exposure Even Though Some Appealing Parties Might Win On Remand.

     Appellate courts are comprised of justices, who not only follow the law but attempt to reach a fair result based on the circumstances. Adams v. MHC Colony Park Ltd. Partnership, Case No. F062160 (5^th Dist. Mar. 10, 2014) (partially published on rehearing; fee discussion unpublished) illustrates this in the context of substantial fee exposure to nonappealing parties even though the underlying judgment had been reversed and would have to go back for remanded proceedings.

     Mobile Home by Ford Motor Company.  1924.

     What happened was that 66 plaintiffs of a mobilehome park, after suing owner for failure to maintain the park’s physical improvements and common facilities, either suffered nonsuits or an adverse jury verdict (after a 43-day jury trial). The lower court then assessed $1.975 million in attorney’s fees and costs against the losing plaintiffs. Of this plaintiff constituency, 5 did not appeal. Upon review, the appellate court reversed the judgment. However, that left the lingering question of what to do about the fee award against the 5 nonappealing plaintiffs.

     The appellate court decided that the reversal of the judgment had to extend to all portions with respect to the 5 nonappealing parties. Although the general rule is that an unappealed judgment is final unless appealed, there is an exception allowing for an entire reversal of a judgment if the portions reversed are so interwoven with the remainder of the judgment. This exception was invoked here, because otherwise 5 people might be stuck jointly and severally with a large fee exposure even though some of the remaining appealing plaintiffs might ultimately succeed on remand. Unfairness was the theme in this one.

Equity: $14,504.50 Fee Award For $22,162.55 Compensatory Judgment Was Justified

 

Given Compensatory Award Was Close to Unlimited Jurisdiction Limit, Fee Award Was No Abuse of Discretion.

     In California state courts, an unlimited civil case involves a matter in which the amount in controversy exceeds $25,000, exclusive of fees and costs in most instances. (Code Civ. Proc., §§ 86(a), 88.) However, a trial judge has discreton to dny a plaintiff costs (fees included) where the judgment could have been rendered in a court of lesser jurisdiction, meaning the compensatory award is $25,000 or less. (Code Civ. Proc., § 1033(a); Steele v. Jensen Instrument Co., 59 Cal.App.4th 326, 331 (1998).)

     Coast Rehabilitation Services, Inc. v. Gray Duffy, LLP, Case No. B245940 (2d Dist., Div. 6 Dec. 4, 2013) (unpublished) involved an unlimited civil case where plaintiff won a compensatory award of $22,162.55 (inclusive of prejudgment interest), and the trial court later awarded fees of $14,504.50.

     The fee award was affirmed on appeal. Because the compensatory award was close to the $25,000 jurisdictional limit, the lower court did not abuse its discretion by awarding $14,504.50 in fees.

Equity: Attorney’s Fees Award Remanded For Another Looks Because Entered Judgment Based On Stipulated Default Arrangement May Have Been An Unlawful Penalty

 

As Far As Awarding Fees, Orange County Default Fee Schedule Suggested in Remand Look If Entered Judgment Significantly Reduced In the “Redo”.

     The Fourth District, Division 3 has published several decisions in the unlawful penalty area involving leases with certain penalties and judgment stipulations having an increased penal amount feature over/above any agreed-upon settlement amounts. The next unpublished decision shows that this division has their collective eyes on this issue.

     In Hermanson v. Patterson, Case No. G047401 (4th Dist., Div. 3 Sept. 6, 2013) (unpublished), the trial judge entered a $50,660.75 judgment even though the circumstances demonstrated that judgment debtor’s full performance might have resulted in a judgment of only $19,423.78 under a settlement structured through a held stipulation for judgment arrangement. The trial judge also added another $3,391.25 in attorney’s fees and costs as apparently allowed under the stipulation upon default.

     Acting Presiding Justice Bedsworth, on behalf of a 3-0 panel, reversed the judgment and remanded with further directions to the trial judge.

     Because the entered judgment appeared to be disproportionate had judgment debtor fully performed, it raised unlawful penalty concerns. The appellate court remanded for another look on this issue. In the event that the judgment is significantly reduced in the future, it directed the court to look at the fee award again, suggesting that the Orange County Superior Court Local Rule 366 schedule for default judgments “might provide a useful yardstick for this purpose [refixing fees if the judgment was scaled down in a material way].”

Equity/Fee Clause Interpretation/Section 1717: Prevailing Plaintiffs In LLC Dissolution Dispute Entitled To Fee Recovery Under Broadly Worded LLC Operating Agreement Fee Clause

 

Pre-Appraisal Participation in Litigating Issues Meant Corp. Code Section 17351(b) Did Not Trump Broadly Worded Fees Clause.

     Kashian v. Simonian, Case No. F064325 (5th Dist. Aug. 28, 2013) (unpublished) was a business litigation war between two founding member sides of an LLC. Plaintiffs filed for fiduciary duty breach, declaratory relief, and LLC judicial dissolution, with defendant answering and serving a notice of their rights under Corporations Code section 17351(b) to purchase plaintiffs’ interests in order to avoid dissolution of the LLC. However, the purchase appraisal process was put on voluntary hold, not via a court stay, so the parties could litigate certain issues before a stipulated-to referee. Plaintiffs prevailed on almost all disputed issues, with the referee then awarding them--at the lower court’s insistence--attorney’s fees of $647,734.05 and costs of $44,503. Defendants appealed.

     Unfortunately for appealing defendants, the LLC operating agreement had a very broadly wording fees clause, applying to “any dispute” between the LLC and LLC or among the LLC members which resulted in litigation. Under CCP § 1021 and Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341 (1992), this was broad enough to encompass contractual, tort, and equitable claims. (See also Maynard v. BTI Group, Inc., 216 Cal.App.4th 984, 993 (2013).)

     Defendants’ main contention was that any contractual right to fees was trumped by the special appraisal purchase rights provision relating to judicial LLC corporate/LLC dissolutions (Corp. Code, § 17351(b)) because that latter section envisioned fees would only be incurred in the appraisal process and could only come out of a court-ordered bond to ensure that the purchase process was timely completed. The appellate court did not have to wrestle through the “trumping” argument because the circumstances showed that the parties stipulated to litigate matters before the appraisal/buyout process and never sought any court stay, such that there was no reason that the LLC operating agreement fees clause did not apply. These special circumstances distinguished the defense reliance on any contrary reasoning in Go v. Pacific Health Services, Inc., 179 Cal.App.4th 522 (2009).

Damages/Deadlines/Equity/Prevailing Parties: Dueling Prevailing Parties Remain That Way After Appeal

 

Remand to Determine if Offseting is Appropriate; Each Note Claim Judged on its Own.

     Williams v. Meyer, Case No. B243491 (2d Dist., Div. 6 June 4, 2013) (unpublished) involved a debtor plaintiff/cross-defendant and creditor defendant/cross-complainant having dueling claims on two notes delivered in favor of defendant and secured by plaintiff’s house (with fees clause existing in both notes). Plaintiff sued to invalidate both notes, claiming the first note was usurious and had been repaid by the labor of her estranged husband. Plaintiff further claimed that the recording of the second note constituted slander of title to her home, causing her to lose refinancing opportunities. On the eve of trial, the parties settled the dispute over the first note by reducing the face amount a little over $1,500 and lowering the interest rate/resetting the interest accrual date. Then, after a two-day bench trial, the lower court ruled that defendant had slandered title to the tune of $29,639 in lost refinancing opportunities. Plaintiff was declared the prevailing party entitled to costs, and she filed an unopposed costs bill asking that $7,121.75 in costs and the $29,639 in damages be offset against the first note’s outstanding balance.

     Now we come to the fee awards. Both sides moved for fees, with defendant being awarded $43,750 for prevailing on the first note and with plaintiff being awarded $122,500 in fees as damages for slander of title/Civil Code section 1717 fee recovery with regard to the second note.

     Both sides appealed to the Second District, Division 6 reviewing court.

     Although plaintiff did get a little lowering of the terms on the first note based on usury, defendant nonetheless prevailed when the court determined that $33,450 (out of $35,000) was owed on the note--rebuffing the theory that estranged husband’s labor had paid it off. Also, simply because plaintiff was the prevailing party for costs did not matter, because the concept is not the same when it comes to section 1717 fee recovery (“net monetary relief” for costs versus “greater relief” on the contract under section 1717).

     Defendant claimed plaintiff’s fee request was four days late, but the lower court can implicitly extend the deadlines for “good cause” even after the deadline has run, which it apparently did. (Lewow v. Surfside III Condominium Owner Assn., Inc., 203 Cal.App.4th 128, 135 (2012).)

     Alternatively, plaintiff was entitled to fee recovery for prevailing on the second note slander of title claim either under section 1717 by virtue of the fees clause or as damages under the title slander claim. (Sumner Hill Homeowners’ Assn., Inc. v. Rio Mesa Holdings, LLC, 205 Cal.App.4th 999, 1030-1031 (2012) [fees are damages under slander of title].)

     Finally, although the fee awards were affirmed, the matter was remanded for the lower court to consider whether it would honor plaintiff’s request for an offset of the damages/fee recovery against what was owed under the first note--an equitable consideration for the trial court in the first instance.

Costs/Equity: “Theoretically” Winning Defendant Properly Denied Routine Costs

Equitable Circumstances Prevailed in this One.

    Boyko v Millican, Case No. G046746 (4th Dist., Div. 3 May 6, 2013) (unpublished), a 3-0 decision authored by Justice Ikola, is a case demonstrating that equities will often times dictate routine costs decisions, especially where the lower court had a paradox on costs issues recognized as material by the appellate court.

    In this one, a single particular defendant--found to have committed a fraud and a tortfeasor named by plaintiff--was ultimately found not to have caused plaintiff's damages. The trial court did not grant defendant routine costs. This determination was affirmed on appeal. Defendant was unified in interest with an attorney defendant found liable to plaintiff for damages. This was enough to find that plaintiff achieved his results in a victory against the co-defendant, sufficient reason to deny routine costs to the unified "losing" co-defendant.

Equity: Lower Court Did Not Err In Equitably Allocating Partition Fees/Costs 50-50 Where One Side Got A Total In Kind Partition And Other Parties Did Not

 

Allocation Doesn’t Necessarily Have to be Proportional in Nature.

     Cason v. Cason, Case No. D059676 (4th Dist., Div. 1 Apr. 22, 2013) (unpublished) deals with allocation of attorney’s fees and costs in a partition case. The germane statute, CCP § 874.040, has a double-barrel measure--the lower court shall apportion partition costs among the parties “in proportion to their interests or make such other apportionment as may be equitable.” Equity prevailed in Cason.

     Without boring you (and when do we do that), plaintiff obtained a partition in kind for 40 acres--a complete partition--but defendants only obtained an incomplete, aggregate division for remaining acreage because zoning ordinances. Based on this “inequity,” the trial court ordered that fees/costs be split 50-50, rather than 25-75 based on property ownership interests.

     Plaintiff appealed, but to no avail. Equity prevailed because defendants were left with 119 acres that could not be divided in kind because of county acreage requirements. Because this was a tangible value difference in plaintiff’s favor, partition apportionment affirmed on appeal.

Equity: Attorney Providing Affidavit Of Fault For Vacation Of Default Judgment Rightly Assessed With $12,000 Fee Order In Plaintiff’s Favor

 

     Plaintiff obtained an approximate $72,000 default judgment against defendants represented by an attorney who submitted an affidavit of fault to get the judgment vacated (the attorney was suspended from the practice of law). The trial court found the default had to be vacated on a mandatory basis under CCP § 473, but ordered that attorney pay $12,000 in attorney’s fees spent by the other side in obtaining the default and defending against the successful motion to vacate that still generated the fee award.

     Ex-attorney challenged the fee order in Park v. Help U Build, Case No. B239446 (2d Dist., Div. 2 Apr. 15, 2013) (unpublished), to no avail.

     Attorney argued he had no notice of the successful motion to vacate the default judgment, but the appellate court rejected this because he had to know that mandatory relief was the likely result of the hearing and did nothing to exercise diligence in protecting his interests when adverse fees were a natural consequence of his “fault” affidavit.

     As far as the amount of the fees, plaintiff was entitled to various items, such as (1) the fees and costs associated with defending against the motion to vacate the default judgment (Vanderkous v. Conley, 188 Cal.App.4th 111, 116, 118 (2010)), and (2) fees and costs in obtaining the defaults, especially given that plaintiff’s attorneys sent unheeded notices to defense counsel reminding him of the need to respond (Rogalski v. Nabers Cadillac, 11 Cal.App.4th 816, 823 (1992)).

Equity/Section 1717/Poof!: Fifth District Finds “Buried, One-Sided” Escrow Agreement Fees Clause Was Unconscionable As To Losing Putative Class Action Plaintiff On Government Code Excessive Notary Fee Claim

 

$266,801 Fee Award to Defense Went POOF!

     The defense in Hutton v. Fidelity National Title Co., Case Nos. F063318/F063922 (5th Dist. Jan. 31, 2013) (partially published; fee discussion unpublished) must have been feeling pretty good in this one. It had won a summary judgment against a plaintiff suing it on behalf of a putative class for excessive notary fee changes under the Government Code. Then, after it prevailed, the lower court awarded postjudgment fees under a contractual provision in escrow instructions to the defense in the amount of $266,801--the full amount of defendant’s request.

     The fee award went POOF! on appeal. The appellate court reversed because it found the fee award sprang from an unconscionable fees clause hidden in escrow instructions. So, there truly was surprise: the fees clause was hidden in the signing process and was buried in the escrow instructions themselves, contained in a general provision with no highlighting. Also, the clause was substantively skewed too much in a one-sided nature in favor of the escrow company. The defense tried to argue that Civil Code section 1717’s mutuality principle rescued the unilateral nature of the provision, but that only applied to “on the contract” disputes--not involved here, because plaintiff was suing based on a Government Code statutory provision. Fee award reversed.

Houdini escapes from straightjacket upside down.

Class Actions/Equity/Referral Agreements: Attorney May Be Equitably Estopped From Enforcing Fee-Sharing Agreement Violations Where Attorney Prevented Other Participating Attorneys From Compliance With Fee-Sharing Requirements

 

Equity Can Play a Role In These Disputes, Rules Fourth District, Division 3.

     Barnes, Crosby, Fitzgerald & Zeman, LLP v. Ringler, Case No. G045872 (4th Dist., Div. 2 Dec. 19, 2012) (published) goes to show you that equity does interplay with ethical fee-sharing restrictions.

     Here, the Fourth District, Division 3, in a 3-0 opinion authored by Justice Ikola, held that an attorney may be equitably estopped from claiming a fee-sharing contract in a class action is unenforceable where that attorney may have been responsbile for noncompliance with the fee-sharing restrictions and may have unfairly prevented the other attorneys from complying with such mandates.

     The appellate court reversed a trial court ruling based on fee-shifting restrictions, finding that the controlling class action attorney may have steered client control to impede the fee-sharing attorneys from getting a written fee split agreement. Any other result, said the court, might “have a dampening effect on attorney referrals.”

     So, even though the trial court awarded $13.5 million in fees to the offending attorney, it did not preclude supplemental pleadings by the aggrieved attorneys on the equitable estoppel theory.

Estoppel/Equity/Section 998: Lawyer Collection and Client Malpractice Actions Barred By Oral “We Go Our Own Way Agreement,” Which Violated State Bar Professional Conduct Rule 3-400(B), But Could Could Be Enforced By Winning Clients

 

Clients’ Section 998 Offer Was Invalid Based on Absence of Acceptance Language, So Expert Witness Fees Recoverable.

     Law Offices of Roger E. Naghash v. Roy, Case No. G044785 (4th Dist., Div. 3 Dec. 4, 2012) (unpublished) is a wild dispute between former clients and an attorney arising from clients’ prior loss of a battle with his HOA which resulted in a large fee exposure. Buckle up on this one, for we now tell the facts described in an interesting 3-0 decision authored by Justice Fybel of our local Santa Ana appellate court.

     Clients retained former attorney for an HOA dispute, with clients dismissing the case without prejudice during trial but then getting hit with fees in excess of $167,000 in HOA’s favor. Former attorney represented the clients on appeal and obtained a reversal of the fees award. Then, former attorney sent clients a notice of right to arbitrate in connection with a claimed overdue receivable in excess of $93,000. According to clients, one of clients had a 43 minute phone conversation in which the parties reached a “walkaway” agreement--clients would absorb the $143,000 in fees already paid to former attorney, clients would not pursue any malpractice claims, and attorney would not pursue any claims for additional fees. Apparently, attorney did not see it that way and filed a collection suit, with clients asserting estoppel and waiver as defenses and also cross-complaining for malpractice. Curiously, attorney asserted a defense to the cross-complaint based on the “modification of written contract by executed oral agreement.”

     Following a bench trial, the trial judge found that a “walkaway” agreement had been reached but denied clients’ request for $15,911.25 in expert witness fees based upon a rejected CCP § 998 offer.

     Both sides appealed; both sides lost.

     The interesting issue on the “walkaway” agreement was that it violated State Bar Professional Conduct Rule 3-400(B), which provides that an attorney cannot settle a claim or potential claim for malpractice unless the client is informed in writing about seeking independent advice and given an opportunity to seek that advice. Of course, none of these safeguards occurred during the course of the verbal phone call, but the real issue is who had the power to void an offending agreement to the contrary. Answer: the agreement is voidable by the client, not void altogether, such that clients’ use of the oral agreement as a defense showed it was not being voided and could be enforced by clients. There was nothing illegal about the agreement, because it was simply an avoidance of future litigation by both sides. Similarly, the mutual waiver of claims constituted proper consideration for the agreement.

Equity/Prevailing Party: Trial Court’s Failure To Specify Fee Entitlement Basis Required Remand Of Fee Award

 

Not Clear If Fee Award Based on Partition Claim or Not.

     In a tenant-in-common apartment building dispute (complete with a partition claim), a plaintiff appealed a lower court determination that defendants were entitled to fees of $6,087, arguing there was no clear identification of the statutory basis for the fee award.

     That argument resonated and resulted in a reversal in Groves v. Groves, Case No. C065174 (3d Dist. Nov. 14, 2012) (unpublished).

     Given that there was no contract and the parties agreed to sell the commonly owned property via stipulation, it was not clear that the lower court awarded fees based on the partition claim. This required a reversal and clarification on remand when it came to the fee award.

Equity: Vacated Default Judgment Based On Attorney Fault Was Correctly Conditioned On Payment Of $3,270 In Attorney’s Fees/Costs To Plaintiff

 

Late Opposition to Default Proceeding by Plaintiff Did Not Change Result.

     The Second District, Division 6, in Towne v. Joaquin, Case No. B222077 (2d Dist., Div. 6 Nov. 6, 2012) (unpublished), affirmed a trial court’s order that plaintiff be awarded $3,270 in fees and costs as a condition of vacating a default judgment against defendant based on attorney fault.

     The appellate court, per a 3-0 opinion authored by Justice Yegan, determined that this fee/costs condition was just, especially given that a $51,968 default judgment in a wage/hour dispute was overturned so the matter could proceed on the merits. Defense attorney asserted that plaintiff’s opposition papers were not timely filed and served, which waived the fees/costs. However, the appellate court found that plaintiff’s counsel had a good excuse after returning from an Australian vacation right around the opposition deadline so that the lower court had discretion to consider the lately filed opposition papers.

Kangaroo.  1876.  Library of Congress.

Section 1717/Equity: Individual Defendant’s Recovery Of Fees Against Plaintiff Reversed Because Instrument Cancellation Claim Is Not “On A Contract”

 

Claim Is Equitable in Nature, Not Triggering Section 1717 Exposure.

     In Gibson v. Deutsche Bank National Trust Co., Case No. A133721 (1st Dist., Div. 4 Oct. 3, 2012) (unpublished), a lower court awarded attorney’s fees to an individual defendant on a cancellation of instrument claim based on the notion that it was an “on a contract” claim under Civil Code section 1717 (based, of course, on a fees clause in a trust deed and associated documents--although plaintiff sued to void instruments in equity).

     The $6,616.25 fee award in favor of individual defendant was reversed on appeal.

     The reason? The cause of action for cancellation of void instruments under Civil Code section 3412 was an equitable claim, not one “on a contract.” Given this fundamental reality, no broad “on a contract” construction could give rise to fees in this circumstance, even under Civil Code section 1717.

Appeal/Equity: Partition Litigant Denied Attorney’s Fees By Receiver Is Rebuffed By Failure To Provide Adequate Appellate Record

 

Aside from That, His Argument Not Properly Supported and No Error Established.

     A partition litigant denied $28,760.50 in requested attorney’s fees by a receiver did not help himself on appeal in Tacherra v. Tacherra, Case No. A133677 (1st Dist., Div. 2 Sept. 12, 2012) (unpublished). Why? He committed three sins in his appellate presentation: (1) making an undeveloped argument with inadequate support (the appellate courts are more and more not excusing this transgression); (2) failing to provide opposition motion papers or the transcript of the parties’ arguments at hearing (with many reviewing courts dismissing appeals or declaring arguments forfeited without a transcript); and (3) failing to affirmatively establish error (always the burden on appeal, with the appellant usually having to establish error that was other than harmless or demonstrating prejudice, in appellate lingo).

“Law and Equity, or a Peep at Nando’s.”  "Thurlow, a barefooted penitent draped in a sheet by wearing his Chancellor's wig, approaches a coffee-house bar (left) within which stands a pretty young woman..."  1787.  Library of Congress.

Appeal/Equity: Maintenance Expenses/Fee Award In Partition/Quiet Title Action Was Affirmed Because Appellant Had Failed to Appeal Postjudgment Award On The Issue.

 

Result Was Dismissal of the Appeal.

     Reedy v. Bussell, Case No. D059378 (4th Dist., Div. 1 July 26, 2012) (unpublished) was a situation where a trust beneficiary appealed maintenance expenses and attorney’s fees awarded to a trustee after a lower court order found that the expenditures were for the common benefit of the ranch owners in partitioning the ranch for sale. (The expense/fee award totaled $280,236.62.)

     Trust beneficiary, unhappy with the result, appealed but did so untimely. Although appealing some orders, he forgot to timely appeal the “common benefit” order which was a postjudgment order that affected an earlier judgment and was appealable because it related directly to the enforcement of a judgment. (Lakin v. Watkins Associated Industries, 6 Cal.4th 644, 654 (1993).) Beneficiary’s appeal was dismissed.

Costs/Equity/Section 998: Second District, Division 6 Affirms Judicial Referee Split And Determination That 998 Offers From Plaintiffs Were Valid For Awarding Costs To Plaintiffs

 

     In a construction defect matter, both sides appealed after a trial court found that judicial referee costs should be split consistent with a judicially-filed stipulation and after making an award of certain statutory costs to plaintiffs after finding that their CCP § 998 offers were valid.

     Both sides were disappointed after the Second District, Division 6 in Antangan v. Shea Homes Limited Partnership, Case Nos. B227527/B230097 (May 7, 2012) (unpublished) affirmed the determinations reached at the trial court level.

Below:  Aerial view of Levittown.  1959.  Wikipedia.

 

Equity: Partition Fee Award For “Common Benefit Of Property” Necessarily Proper And Equivalent To “Common Benefit Of Parties”

 

Substance Is King, Not Labels.

     Above:  15th century depiction of Cain and Abel.  Wikipedia.

     We always have heard that substance, not labels, usually prevails in the law--or, for that matter, equity (even more so). The next case vindicates this general rule.

     In Adrian v. Adrian, Case No. D058877 (4th Dist., Div. 1 Mar. 22, 2012) (unpublished), brothers in a nasty partition by sale dispute eventually hashed it out by which one brother got attorney’s fees in an injunction battle and an unlawful detainer battle for keeping the premises from being damaged by another brother. ($134,468.24 in fees were requested, but the prevailing brother actually got $28,439.37 in granted fees--we do not know if he has happy with this result.)

     On appeal, the reviewing court did sustain that the fees were properly granted to the winning brother. Partition has a lot of equitable fee shifting provisions, including those that allow for a court to allocate fees and costs in favor of a party based on the “common benefit” theory. (See Code Civ. Proc., §§ 874.010, 874.020.) Even though the trial court awarded fees for the “common benefit of the property,” this was no misnomer given that this also the equivalent of “common benefit to the parties” (labels aside, give me a break, said the appellate panel with much more eloquent panache--common benefit is common benefit). Also, it was no abuse to allocate the fees against one of the brothers, because section 874.040 gives this type of equitable apportionment discretion to the lower court in partition actions.

Equity/Substantiation Of Fees: $5,000 Fee Award To Winner In Partition Action No Abuse Of Discretion

 

Request Made in Verified Trial Brief Did Pass Muster.

     This one is interesting for the proof accepted to sustain a $5,000 attorney’s fees award to the winner in a partition action.

     Defendant in a partition action challenged a finding that plaintiff was entitled to $5,000 in attorney’s fees as a cost in a partition action. Defendant presented no testimony or documentary proof, but relied on a request in a trial brief. Was this enough?

     Yes, was the answer in Lockard v. Hunter, Case No. H036258 (6th Dist. Mar. 9, 2012) (unpublished).

     The reason? The trial brief was verified. Usually, a trial brief is no more than argument. However, plaintiff verified the trial brief so that it was the equivalent of an evidentiary declaration. Also, the amount was not outlandish, because defendant himself had submitted some proof that he was entitled to a $3,000 fee award for efforts during the partition action. Fair enough here, in this equitable action.

Equity/Substantiation Of Fees: Trial Courts Have No Limitations On Equitable Discretion To Apportion Attorney’s Fees In Partition Actions

 

Second District Panel Disagrees With Contrary Holding in Finney; Approximation of Hours Under Penalty of Perjury Can Be Adequate Fee Substantiation.

     The Second District, Division 4 in Lin & Lin v. Jeng, Case No. B232899 (2d Dist., Div. 4 Feb. 23, 2012) (certified for publication) considered the extent of trial court discretion to apportion attorney’s fees under Code of Civil Procedure 874.040, a fee-shifting provision applicable to partition actions. In this case, the appellate panel disagreed with the prior holding of Finney v. Gomez, 111 Cal.App.4th 527, 545-546 (2003) that equitable apportionments can only be made under two circumstances--where litigation arises among only some of the parties, or where the interest of the parties in all items, lots, or parcels of property is not identical. The Lin & Lin panel found Finney was inconsistent with the broad statutory language of section 874.040 and erred in limiting equitable discretion by using Law Revision Commission comments to “trump” the statutory provision itself. Rather, the statute’s broad language did not limit the trial court’s equitable discretion as Finney earlier held.

     With respect to fee substantiation, counsel’s declaration with an approximation of hours, made under penalty of perjury, sufficed, especially given that no specific amount was challenged as being unreasonable by the contesting parties on appeal.

Equity/Judgment Enforcement: Appellate Court Discusses Fee Recovery From Injunction Bonds And Mandatory Nature Of Fees For Judgment Creditors’ Failures To Acknowledge Satisfactions Of Judgments

 

Unpublished Decision Takes on Issues in Post-Judgment Phase of Case.

     Although really an abuse of discretion/substantial evidence case on appeal, Terzian-Feliz v. Ajamian, Case No. A128900 (1st Dist., Div. 4 Feb. 21, 2012) (unpublished) does discuss several important principles relating to injunction bonds and post-judgment enforcement procedures.

     First, recoverable attorney’s fees are “costs” that can be recovered under an injunction bond, including enforcement through a motion in the original action. (Code Civ. Proc., § 996.440(a).) This enforcement procedure is summary in nature, but allows the trial court to adjudge credibility based upon declarations/affidavits--in stark contrast to summary judgment motions where factual determinations are taboo.

     Second, attorney’s fees incurred to successfully defend the entire underlying action--which means that the preliminary injunction was defeated--are recoverable in entirety subject to fee reasonableness limitations. (Russell v. United Pacific Ins. Co., 214 Cal.App.2d 78, 85-86 (1963).)

     Third, a trial court has discretion to increase the injunction bond upon proof that more fees have been expended to defend the case as compared to the amount of the previously posted bond. This can be done through a motion supported by a defense declaration, subject to the lower court’s credibility determinations as to the testimony. Any opposition to an increase request proceeds based on declarations/affidavits also. (Code Civ. Proc., § 996.010(b)-(d).)

     Fourth, enforcement of the injunction bond has to await entry of a final judgment in the underlying action. (§ 996.440(b).)

     Fifth, a judgment creditor’s failure to acknowledge a satisfaction of judgment does allow the judgment debtor to move to compel such acknowledgment, with judgment creditor not being able to condition the acknowledgment on paying amounts in excess of the particular judgment involved--meaning that the judgment creditor may need to obtain a separate judgment to recover injunction bond and appellate costs in many cases. When a judgment debtor prevails on such a motion to compel acknowledgment of judgment satisfaction, the trial court must award reasonable fees. (Code Civ. Proc., § 724.080; Lucky United Properties Investment, Inc. v. Lee, 185 Cal.App.4th 125, 140 (2010) [discussed in our May 29, 2010 post].)

Special Fee Shifting Statute/Equity: Conditioning Leave To File Cross-Complaint Upon Payment Of $80,000 In Fees To Other Side Was No Go

 

Condition Was Too Much of a Sanction, Because Fees Not Causally Related to Cross-Complaint Filing.

     In a convoluted fee dispute between former client and attorney, the trial court granted attorney leave to file a cross-complaint, but conditioned on attorney paying client some $80,000 to compensate her for attorney’s fees she incurred in preparing for an arbitration hearing aborted in part due to attorney’s actions.

     Attorney appealed this “sanctions” order in Mitzner v. Fox, Case No. C061263 (3d Dist. July 19, 2011) (unpublished).

     Care to hazard a guess on the result? If you said reversal, you won!

     Code of Civil Procedure section 426.50 does authorize the trial court to grant leave to file a cross-complaint upon “such terms as may be just to the parties” as long as the requesting party acted in good faith. However, nothing in the statute or legislative comments allowed the court the authority to impose a fee “sanction” for conduct unrelated to any injustice that arose from the filing of the cross-complaint, which is exactly what the lower court did here.

Equity: Fees In Partition Action For “Common Benefit” Allowable, Apportioned To Each Party’s Interest In Real Estate

 

Appellate Court Reversed Award of Accountant Fees Against One Party, Deciding Interest Apportionment of Expenses Was Proper.

     In the equity arena, partition is the procedure for segregating or terminating common interests in the same parcel of property, as where property is held jointly or by tenants in common. California has a statutory scheme governing partition, set forth at Code of Civil Procedure section 872.010 et seq. As one would expect, there is authorization to pay attorney’s fees under certain circumstances. Section 874.010 defines partition costs to include reasonable attorney’s fees incurred for the common benefit, as well as other common benefit disbursements. In turn, section 874.040 provides that the court shall apportion the costs of partition among the parties in proportion to their interests, but retains discretion to make an equitable apportionment on other bases. However, the ordinary rule is to apportion fees and costs determined to be for the common benefit. (Finney v. Gomez, 111 Cal.App.4th 527, 546 (2003).)

     A partition fee award was affirmed but a partition cost award was modified in Guttierrez v. Guttierrez, Case No. C065165 (3d Dist. Mar. 22, 2011) (unpublished). There, a fee award for common benefit work was apportioned by property percentages, so that was just fine. However, the trial court allocated all of an accountant’s common benefit work to one party, with the appellate court modifying the award by apportioning the expenses according to each party’s interest--no evidence supported a departure from the ordinary rule.

Equity: Think That You Will Have To Pay Fees When Obtaining Mandatory Default Relief?

 

Not Necessarily . . . . As The Third District Informs Us in the Next Decision.

     We would likely tell you that a common legal urban myth is that one always needs to pay some costs and fees as a condition of obtaining default relief under the mandatory “attorney falls on the sword” prong of Code of Civil Procedure section 473. In fact, section 473(b) provides that the court shall direct the attorney to pay reasonable compensatory legal fees and costs to opposing counsel or the parties. Sounds mandatory, doesn’t it? Well, not necessarily, as the next unpublished decision from the Third District demonstrates. General legal urban myths are, like others, not universal in nature.

     In Reyes v. Johnson, Case No. C064402 (3d Dist. Mar. 15, 2011) (unpublished), defendant obtained set asides of their defaults and the resulting default judgment against them, determinations affirmed on the merits upon appeal. Plaintiff also argued that it was error for the lower court to deny any award of costs or fees as a condition of the default set asides.

     No, it was okay not to award them under the circumstances. Reason?

     The key word in section 473(b) is that only reasonable fees and costs shall be awarded. Here, the trial court had no obligation to award fees and costs it determined were unreasonable. That happened to be the case, because the proof suggested that plaintiff’s counsel took defaults without warning to defense counsel after providing an open-ended extension of time while defendants were waiting to see if a carrier picked up a defense (an event which would mean new defense counsel would be entering the scene). The lower court was properly allowed to not award costs and fees where they were the product of plaintiff’s counsel failure to mitigate by warning defense counsel that a response needed to be provided before proceeding in default judgment mode.

Consumer Statutes/Equity: Attorney Denied Appellate Fees For Beating A Client’s Claim Requesting A Refund Of Unearned Fees Based On A Technicality

Failure to Award Fees under B & P § 6204(d) Was No Abuse of Discretion.

     Here is an interesting case in the continuing saga of prominent civil rights attorney Stephen Yagman. The case is also poignant in showing how trial and appellate courts will use equitable principles to resolve fee recovery matters.

     In Yagman v. Colello, Case No. B223412 (2d Dist., Div. 4 Jan. 25, 2011) (unpublished), former client obtained a nonbinding State Bar arbitration award against his former attorneys requiring them to refund him $261,000 of a $290,000 fee after the district court disqualified Yagman from representing Colello (even though Colello was convicted and then imprisoned for over 2 years). Yagman then challenged the award through a de novo procedure in court, successfully arguing that former client could not recover any damages based on a one-year statute of limitations. The appellate court, earlier, affirmed the dismissal on the technicality. Yagman then moved to recover $64,768.50 in attorney’s fees incurred in the prior appeal under Business and Professions Code section 6204(d), which does allow the trial court discretion to award such fees to the prevailing party. The lower court, however, found it “would be a gross abuse of discretion to grant the fee request” based on Yagman’s refusal to refund any of the unearned fees when he won on a technical defense rather than refute the arbitrator’s findings that the unearned fee should be returned. Yagman appealed.

     He lost.

     The appellate court, clearly siding with the equities as it saw things, found no abuse of discretion in what the lower court did. It credited the State Bar arbitrator’s findings that Yagman should return the unearned fees and did not find that these findings should be disregarded. The presumption of correctness accorded to the trial court’s order prevailed in this particular appeal.

Year End Wrap-Up: Mike & Marc’s Top 20 Attorney’s Fees Decisions In 2010--Part 1 of 2.

     Above:  Wrapping It Up.

      As we wish all readers the happiest of Holidays, we now present our top 20 published decisions from California appellate courts or the Ninth Circuit. This list is not meant to slight other important decisions in certain areas, but these are the ones that “rose to the top” from our perspective. We will post 10 today and 10 in an ensuing post. The number of ranking is not geared at all to the decision’s relative importance.

     20. Quan v. Computer Sciences Corp., 623 F.3d 870 (9th Cir. 2010) -- authored by N.D. Iowa District Judge Bennett, siting by designation; discussed in our Oct. 21, 2010 post.

     District courts retain discretion to award or deny routine costs to a prevailing party in an ERISA case as long as a proper record of the decision making process is made.

     19. California Correctional Peace Officers Assn. v. Virga, 181 Cal.App.4th 30 (1st Dist., Div. 4 2010) -- authored by Justice Sepulveda; discussed in our Jan. 16, 2010 post.

     A civil rights case arising under 42 U.S.C. § 1983 is not a “civil proceeding under the California Torts Claim Act” for purposes of Code of Civil Procedure § 1038 fee awards to state entities.

     18. Pipefitters Local No. 636 Defined Benefit Plan v. Oakley, Inc., 180 Cal.App.4th 1542 (4th Dist., Div. 3 2010) -- authored by Justice Aronson; discussed in our Jan. 14, 2010 post.

     Shareholder in publicly-traded company properly denied fee recovery under “substantial benefit” equitable rule where shareholder provided no pre-suit notification to the company and achieved fairly immaterial changes in a challenged proxy statement.

     17. Mundy v. Neal, 186 Cal.App.4th 256 (2d Dist., Div. 2 2010) -- authored by Justice Ashmann-Gerst; discussed in our July 1, 2010 post.

Disabled plaintiff’s failure to make a prelitigation demand for corrective action barred fees requested under California’s “catalyst theory.”

     16. Uzyel v. Kadisha, 188 Cal.App.4th 866 (2d Dist., Div. 3 2010) -- authored by Justice Croskey; discussed in our Sept. 23, 2010 post.

Probate Code § 17211(b) fee recovery to beneficiaries, as against trustees, has a “reasonable cause” element akin to the same element in a malicious prosecution action.

     15. Kirby v. Immoos Fire Protection, Inc., 186 Cal.App.4th 1361 (3d Dist. 2010), review granted, No. S185827 (Nov. 17, 2010) -- authored by Justice Sims; discussed in our July 27, 2010 post.

     Employer can recover fees in action containing Labor Code § 218 claims other than minimum wage/overtime compensation claims. In granting review, the California Supreme Court framed the issues to be considered as being these: (1) Does Labor Code § 1940 apply to a cause of action alleging meal and rest period violations or may attorney’s fees be awarded under Labor Code § 218.5?, and (2) Is our analysis affected by whether meal and rest period claims are brought alone or accompanied by wage/overtime claims?

     14. Leader v. Cords, 182 Cal.App.4th 1588 (4th Dist., Div. 1 2010) -- authored by Presiding Justice McConnell; discussed in our Mar. 24, 2010 post.

     Probate Code § 17211(b) is to be liberally construed in favor of trust beneficiaries successfully challenging a trustee’s failure to make trust distributions (construing “contests the trustee’s account” language in the fee-entitling statute).

     13. Barnett v. First National Ins. Co. of America, 184 Cal.App.4th 1454 (2d Dist., Div. 7 2010) -- authored by Justice Jackson; discussed in our May 28, 2010 post.

     Joint offers under Code of Civil Procedure § 998 to husband and wife are valid without need for apportionment on a going-forward basis, disagreeing with its prior Weinberg decision.

     12. County of Santa Clara v. Superior Court, 50 Cal.4th 35 (Cal. Sup. Ct. 2010) -- authored by Chief Justice George; discussed in our July 27, 2010 post.

     Public entities may compensate private counsel through contingency fee agreements if governmental entities retain control and provide proper supervision over private counsel.

     11. Moore v. Kaufman, 189 Cal.App.4th 604 (2d Dist., Div. 1 2010) -- authored by Justice Rothschild; discussed in our Oct. 24, 2010 post.

     SLAPP attorney’s fees award to successful defendant cannot be imposed against losing plaintiff’s attorney.

     The next 10 decisions are coming soon, so stay tuned--storm watch notwithstanding.

 

Stay tuned for more . . .

Equity: Correction Of Fee Award Judgment Allowable

 

Correction Was Clerical In Nature.

     What happens when a trial judge inadvertently muffs entry of an incorrect attorney’s fees order? Depends on the nature of what needs to be corrected, and whether the correction is a clerical or judicial correction. The next case illustrates the difference in the two concepts, allowing the clerical correction to stand.

     In Tezak v. Carlburg, Case No. G041854 (4th Dist., Div. 3 Dec. 13, 2010) (unpublished), the trial judge corrected a fee/costs award to defendants because it was variant from his actual award at a hearing. Apparently, the trial judge entered a prior order relating to fee incurred in connection with a previous anti-SLAPP motion. Defendants submitted an award order with correct numbers, which the the trial court signed (indicating it superseded the prior incorrect order).

     Plaintiff appealed, but Justice Ikola--on behalf of a 3-0 panel--found that it was a correctable clerical error rather than a uncorrectable judicial error.