SECOND DISTRICT COURT OF APPEAL DISCUSSES TRIAL COURT’S DISCRETION TO REDUCE CIVIL CODE SECTION 1717 CONTRACTUAL FEE AWARD WHERE WINNING LITIGANT INCREASED UNNECESSARY FEES BY ITS LITIGATION CONDUCT.
The Second District Court of Appeal, in a 2-1 opinion with an extensive dissent by Presiding Justice Cooper, has penned a very interesting decision that confirms the trial court has considerable equitable discretion to reduce contractual attorney fees awarded under Civil Code section 1717, especially where a winning litigant caused substantial unnecessary fees to be incurred for lying under oath and for creating the litigation to continue based upon selective recollection of events. The dissent believed that the trial court was punishing the winning litigant, an improper consideration in deciding the amount of fees to be awarded. The case is EnPalm, LLC v. The Teitler Family Trust, Case No. B194372 (2d Dist., Div. 8 April 30, 2008).
A defendant trust, seller of an apartment builder, defensed fraud/contractual claims brought by plaintiff buyer, based on failure to disclose the existence of a long-term tenant, when the trial court excluded a crucial document as being inadmissible.
Defendant trust clearly prevailed, with the trial court determining that $50,000 was a reasonable lodestar in light of the fact defendant did not present a calculation of its hourly fees or include any attorney timesheets in its fee petition. However, the trial court went further, reducing the fees down to $5,000 based on “equitable” considerations—trust’s main witness lied under oath such that a vast majority of the time incurred by trust’s counsel was unnecessary because of his client’s litigation conduct.
The Second District, in a majority decision authored by Justice Rubin, agreed with the lower court’s fee determination. As the majority saw things, a trial judge properly considers many factors—the nature/difficulty of the litigation; amount of fees involved; the skill required/employed to handle the case; the attention given by the winning attorneys; the success or failure; and other circumstances in the case—in awarding a fee to a prevailing party. That includes whether a reduction of fees is in order for litigation conduct of the prevailing party that made fees unnecessary in the first place.
The majority had no difficulty concluding that a trial court cannot reduce fees for subjective reasons, such as its views of the merits of a case, or antipathy toward a party/its counsel, or its antipathy about a counsel’s litigation strategy, or its intent to punish a party solely for such reasons. (See Slip Opn., p. 6, fn. 5.) However, the majority believed that a winner’s litigation conduct, viewed objectively so as to lead to the conclusion that it made fees unnecessarily, can be weighted in determining whether to reduce fees.
Justice Cooper, in dissent, believed that the lower court did punish the winner and was influenced by factors that have been rejected as appropriate for determining whether a party prevails for purposes of being awarded fees. She opined that a parties’ behavior during the case is equally irrelevant when deciding the proper amount of fees to award to the prevailing party.
The dissent also has a very useful discussion of the factors used to increase or decrease the lodestar both in section 1717 and public attorney general cases. (See Slip Opn., dissent at pp. 6-14.)
This decision is must reading on equitable factors to be used in reducing lodestars in private- or public-oriented cases.