CALIFORNIA ATTORNEY'S FEES

Minors: $534,890 Fee Award Reversed Because Informed Minors Were Denied Their Right To Chosen Counsel In Challenging The Fee Awards

Due Process Rights Led To The Result.

            Chui v. Chui, Case No. B310325 (2d Dist., Div. 1 May 32, 2023) (unpublished), involving contentious probate and trust litigation where a guardian ad litem was appointed for two minors, a lower court approved a $534,890 fee award to GAL’s court appointed attorney to defend against the minor’s “attacks” (the appellate court’s words, not ours).  However, minor had their own counsel who was disqualified and then had another counsel appointed by the court.  The fee award was reversed because minors, given they were close to majority and were informed minors, had the right to their own chosen counsel to oppose the fee request.  That did not happen, such that the fee award had to be overturned and remanded.

Minors: High-Profile Law Firm Successfully Representing Minor In Wrongful Death Action Entitled To $11-12 Million In Fees

Common Count “Mistake” Claim Against Law Firm Went Away On Appeal Based On Denial Of Tort Claims, With Disgorgement Of Prior Fees Soundly Rejected.

            A.M. v. Lieff Cabraser Heiman & Bernstein, LLP, Case Nos. B269624 et al. (2d Dist., Div. 3 June 11, 2019) (unpublished) involved a high-profile law firm’s representation of a minor in a wrongful death action.  After the case was concluded, a guardian ad litem sued the firm for malpractice, other torts, and a common count, in the process trying to undo a minor’s compromise order awarding significant fees to the law firm after obtaining a $55-56 million trial recovery and after obtaining a $24 million lower settlement driven by Chrysler’s post-trial bankruptcy.  Guardian ad litem also sought disgorgement of $1.6 million in fees and costs earlier paid to the firm.  The 2/3 DCA actually found that the law firm did nothing wrong, reversing a common count “mistake” award and validating prior rejections of tort claims against the firm.  In the end, the firm received somewhere between $11-12 million in fees and costs, if our math is correct.  Actually, based on probate minor’s compromise award standards, this does not strike us as being out of the realm and a good result to end this dispute given the mega-settlement which was at issue.

Minors: Schulz v. Jeppesen Sanderson, Inc. Opinion Now Certified For Publication

2/1 DCA Reverses 10% Fee Award To Attorneys Out Of Minor’s Compromise $18 Million Settlement Where Lower Court Did Not Properly Vet CRC 7.955(b) Factors.

            On September 8, 2018, we posted on the then unpublished decision in Schulz v. Jeppesen Sanderson, Inc., Case No. B277493 (2d Dist., Div. 1 Sept. 5, 2018). This opinion reversed a lower court’s award of only 10% in fees out of an $18 million settlement in a minor’s compromise case to the prosecuting attorneys based on the failure to properly consider all of the factors for such an award as set forth in California Rules of Court, rule 7.955(b). We can now report that the decision was certified for publication on October 2, 2018. We would guess that the attorneys will do better on remand given the contingency risks involved and extraordinary results achieved by the attorneys (some of whom happened to be pilots themselves, with expertise to get to the bottom of the issues in the underlying airplane crash incident in Germany).

Minors: Court Of Appeal Reverses And Remands Minor’s Compromise Fee Award In Aviation Wrongful Death Case

Lower Court Overfixated On Two Factors In Awarding Just 10% Of The Children’s Funds As Fees Rather Than The 31% Requested By Children’s Counsel.

            Schulz v. Jeppesen Sanderson, Inc., Case No. B277493 (2d Dist., Div. 1 Sept. 5, 2018) (unpublished) was a complicated aviation wrongful death action against aircraft manufacturers and on behalf of father’s children (who were minors), wife, and two adult daughters from father’s previous marriage based on father’s death in a plane he was piloting in Germany. Plaintiff’s counsel, operating under a 40% contingency arrangement, obtained a settlement of over $18 million in a case that was risky. Two of plaintiff’s attorneys were pilots themselves such that they brought unique insights into the case. After the trial court allocated virtually all of the settlement proceeds to the minor children, children’s counsel requested 31% of the allocation as fees for their success. The lower court only awarded 10%, citing the extensive medical needs of the children (they were born prematurely and had serious, permanent disabilities), the fact the case was not tried, and the fact counsel should have notified the adult daughters of the case earlier in the process.

            The Second District, Division 1, in an opinion authored by Presiding Justice Rothschild, reversed and remanded. The appellate panel believed that the 10% award was an abuse of discretion because the lower court overfixated on the three factors rather than considering all of the nonexclusive factors required under California Rules of Court, rule 7.955(b). Using analogies to class action common fund cases, the Court of Appeal found that 25% was a presumptive Judicial Council-endorsed percentage in the minor’s compromise area and that percentages in class action cases frequently can go up to one-third of a settlement fund. Too little consideration was given to plaintiff’s counsel’s own contingency arrangement, with overwhelming weight being given to the children’s medical needs. This would result in a “chilling effect”—“If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court, rule 7.955, it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases.” (Slip Op., p. 13.) Also important was the fact that plaintiff’s counsel had advanced more than $300,000 in costs on the case, including almost $84,000 which would have borne by the attorneys had no recovery been obtained. The settlement was a good one, with the fact there was no trial and delayed notification of adult daughters being fairly insubstantial considerations in the appellate court’s thought process. Reversed and remanded for a “re-do,” with the appellate court not willing to just set a percentage itself.

Minors: Appellate Court Enters “Dueling” Order That 25% Of Minor’s Recovery Was Reasonable Fee Award Or That Money Paid On This Basis Be Disgorged If Lower MICRA Cap Applies

Reviewing Court Articulated Protection Of Minor As A Paramount Concern.

            Appellate courts are very attuned to protect minors in minor compromise settlements where fee recovery is sought by the attorney representing the minor.  This is well illustrated in Romero v. Kaiser Foundation Health Plan, Inc., Case No. B277499 (2d Dist., Div. 3 Jan. 19, 2018) (unpublished).

            What happened here is that minor’s attorney commenced a medical malpractice suit against certain health care providers, although asserting a non-MICRA claims for willful misconduct.  A $2.5 million settlement was reached, with minor’s attorney requesting 33% of the recovery ($833,333).  The trial judge found 25%, or $625,000, to be the reasonable fee.  However, there was a lingering issue about whether the MICRA cap applied, which would mean the maximum fee award could only be $446,650.  However, this last issue did not have to be addressed had minor’s attorney been content with the 25% amount.  He wasn’t.

            Minor’s attorney appealed, obtaining an interesting appellate result.  The reviewing court found no abuse of discretion in finding the 25% award justified under the CRC 7.955 factors used to determine reasonableness in this situation.  However, given that courts need to be vigilant in protecting minor’s interests (given that the fee recovery comes out of the settlement amount), the appellate court on remand directed the lower court to consider whether the MICRA cap applied under the circumstances of the case and, if so, then order disgorgement of fees by the attorney given that he had been paid based on the 25% amount.

Minors: Trial Court Had Discretion To Reallocate Minor’s Fees To Be Paid By Superior Court, Rather Than Mother

 

Equitable Estoppel Supported Affirming What Happened in Unique Facts Involving a False Claims Act Wrinkle.

     Family Code section 3153 directs that counsel’s fees for a minor are to be paid either by the parties or by the county when it comes to compensating counsel appointed to represent a minor child. (In re Marriage of Lisi, 39 Cal.App.4^th 1573, 1576 (1995).) So, does the trial court have discretion to reallocate fees during the course of the family law proceeding even if it impairs the father’s claim in a separate qui tam proceeding?

     You betcha, said the Fifth District in a decision involving convoluted facts, Smith v. Karabinus, Case No, F068796 (5^th Dist. Oct. 9, 2014) (unpublished).

     A lower court initially specified that mother, not the superior court, should pay fees for appointed minor’s counsel. However, the appointed attorney billed the superior court, which paid rather than mother. Father, learning of the error, filed a False Claims Act case against counsel on behalf of California. Counsel filed a motion to correct the fee order to make it payable by superior court, a request that was granted after father intervened in the family law proceedings because such an order might undermine an element of his False Claims Act lawsuit.

     The fee modification order was affirmed based on the Family Code statutory scheme that had no provision constituting a ban on reconsideration or modification of prior orders based on changed circumstances. Beyond that, equitable estoppel was at play, because a court clerk had led counsel to believe that the fees order would be revised to show payment would come from the superior court.

Minors: Trial Court Had Jurisdiction To Reduce Fee Recovery In Minor’s Compromise Case To Adhere To MICRA Guidelines

 

No Jurisdiction Was Lost, Appellate Court Ruled in Examining Numerous Procedural Issues.

     An attorney representing a disabled minor in a minor’s compromise obtained a $395,000 mediated settlement after a positive jury verdict, with the lower court awarding $158,000 in fees (40% of the minor’s gross recovery). However, to the dismay of plaintiff’s attorney, different lower courts (after some jurist challenges) reduced the fee to $99,416.67, the amount due under MICRA caps. (Significantly, as we discuss later, the contingency fee agreement stated if the case was resolved by settlement or judgment, attorney would be entitled to MICRA fees.)

     The 4/2 DCA affirmed the reduced fee order in Marquez v. County of Riverside, Case No. E057369 (4^th Dist., Div. 2 Sept. 15, 2014) (unpublished), upon appeal by attorney as an objector.

     The first issue was jurisdictional: did the ultimate lower court reducing the fees have jurisdiction to do so? The answer depended upon whether the reduced fee order was based on a clerical error (a good basis to reduce) or judicial error (a basis not supporting a reduction). The appellate court concluded that the MICRA cap was overlooked by inadvertence by the judge awarding the higher amount, so clerical error happened to be what was involved.

     After some other procedural issues rejected by the reviewing court, that left attorney with arguing that the MICRA caps are unconstitutional or that MICRA caps do not control minor’s compromise awards. The MICRA unconstitutionality argument was long ago decided against attorney, with the appellate court determining nothing had changed to dissuade it from giving stare decisis impact to Roa v. Lodi Medical Group, Inc., 37 Cal.3d 920, 923 (1985). The real interesting argument by attorney was that MICRA caps do not control under the Second District’s decision in Gonzalez v. Chen, 197 Cal.App.4^th 881, 885 (2011). The appellate court construed Gonzalez “as indicating that the trial judge must not assume the maximum amount of attorney fees permissible under MICRA constitutes reasonable fees. Rather, the trial court is required to determine whether, within the limitations of MICRA, the requested fees are reasonable under [CRC] rule 7.955.” (Slip Opn., pp. 21-22.) Based on this construction, the fee reduction was deemed reasonable.

     BLOG OBSERVATION—Co-contributor Mike was at the oral argument on Gonzalez, although on a different case on the argument calendar. He does not necessarily agree with the appellate court’s interpretation of Gonzalez, which he believes essentially held that MICRA caps are not necessarily governing in the minor’s compromise area. However, the Marquez court seemed to be influenced by the plaintiff’s attorney’s retainer agreement limiting recovery to MICRA caps anyway—an independent reason likely supporting the result in this one.

Minors: Minors’ Compromise Attorneys Received 25% Fee Recovery, Not Requested 40% Recovery

 

This One a Little Hard to Decipher, Actually, Except on a Presumed Correct Basis.

     Valdivia v. Castillo, Case No. B247766 (2d Dist., Div. 5 Jan. 21, 2014) (unpublished) is somewhat hard to follow, but seems to follow the pattern that confusion will lead to affirmance.

     Here, after a year of litigation on behalf of minors where a defendant under the influence of alcohol struck and killed minors’ mother who darted out in front of the van while high on meth, a minors plaintiffs’ case settled for $700,000, $350,000 per minor. The attorneys representing minors requested a total award of $280,000, representing 40% of the recovery for each minor. The trial court did acknowledge following CRC 7.955, which preempts a lot of former local rules limiting recovery to 25%. Ultimately, the lower court limited fee recovery to 25%, prompting an appeal by the attorneys in the aggrieved law firm.

     This one was affirmed, because it was “not clear from the record” that the lower court applied the preempted local schedule rather than CRC 7.955. Basically, this one was sustained on an abuse of discretion standard, although the reasoning below—to us—is far from clear. However, that commonly does lead to an affirmance on appeal.

Minors/Substantiation Of Reasonableness Of Fees: Apportionment Of Attorney’s Fees Sustained Because Complaining Lawyer Provided Inadequate Record Of Hours Actually Worked

 

First Lawyer Got $10,000; Second Lawyers Got $115,000 in Minors’ Compromise Case.

     Record keeping.  Keyser Brothers Iron Works.  1971.  Jack E. Boucher, creator.  Library of Congress.

     Law Offices of Marvin L. Mathis v. Lotta, Case No. B248251 (2d Dist., Div. 8 Jan. 10, 2014) (unpublished) shows the importance of providing substantiation of hours worked when there is a dispute over apportionment of fees for reasonable value of attorney work rendered.

     There, a $500,000 policy limit settlement was reached in a minors’ compromise case involving the death of mother in an auto accident. However, the first attorney—claiming he did most of the work—contested an apportionment of fees by which he only received $10,000 versus $115,00 to the second attorney.

     First attorney’s challenge to the fee apportionment did not succeed.

     Second attorney argued that the apportionment order was not appealable, but this was found not to be the case. (Breckler v. Thaler, 87 Cal.App.3d 189, 193-194 (1978).)

     On the merits, however, first attorney had provided an inadequate record to overturn the apportionment. He did not submit any estimate or substantiation as far as reasonable hours worked on the case, with a bald assertion of having contributed the most value not satisfying his quantum meruit burden in this one. Apportionment affirmed.

Minors: General Reasonableness Factors, Not 25% Superseded Local Rule Formula, Governed Minor’s Compromise Attorney’s Fees Proceeding

 

Appellate Court Not Bound By MICRA “Caps” and Remanded, With a Reminder That Courts Will Protect Minors.

     Here is an interesting decision in a minor’s compromise fee dispute brought by the minor’s attorney claiming that he should be awarded more fees.

     In a thoughtful decision by Presiding Justice Mallano on behalf of the Second District, Division 1, the fee award was reversed in Gonzalez v. Chen, Case No. B227444 (2d Dist., Div. 1 July 21, 2011) (certified for publication), but with a good reminder to all practitioners that appellate (as well as trial) courts do believe they have a duty to protect minors in these types of disputes.

     Minor’s attorney basically appealed a fee award in a minor’s compromise settlement in a medical malpractice action. The settlement was for $200,000, involving a 2 (or younger) minor that had a shoulder injury that was going to be chronic in nature. Attorney apparently was mad because he was only awarded $50,000 in fees rather than $61,666 in fees. Attorney wanted the full contingency amount owed under his agreement and MICRA, while the trial court applied a local court rule allowing 25% of the settlement recovery ($50,000 rather than the $61,666 contingency recovery).

     The appellate court did reverse and remand because CRC 7.955(d) mandated a more nuanced “reasonable fee” approach, gauging numerous factors rather than a formulaic 25% approach. However, Justice Mallano and his colleagues rejected the MICRA argument, determining it put a cap on fees but did not contain any guarantee to the successful contingency attorney.

     The appellate court did indicate that because fees in minor compromise cases come out of the minor’s recovery, courts must be especially vigilant to look out for the minor. It was concerned that there was a conflict of interest here, because the attorney wanting more fees may not having explained the appeal to the minor’s guardian before the appeal was undertaken by the attorney.

     Although no outcome was presaged, the matter was remanded to apply the CRC 7.955 factors--although we would surmise that the conflict issue and judicial watchdog concerns might an interesting remand make.

Judgment Enforcement/Minors: Defense Costs From Minor Dismissing Case Should Not Be Imposed Against Guardian Ad Litem

Court of Appeal Issued Mandate Quashing Judgment Debtor Exam Proceeding Against Guardian.

     In Beasley v. Superior Court, Case No. D057308 (4th Dist., Div. 1 Dec. 10, 2010) (unpublished), a minor, through a grandmother who was appointed as guardian ad litem, had costs assessed against her in a case after it was voluntarily dismissed. The defense then sought to take a judgment debtor examination of guardian, personally, in order to see if there were assets to satisfy the $12,120.60 costs award.

     The Court of Appeal issued mandate, finding that the judgment debtor exam should be quashed. Reason? Guardian ad litem only serves in a representative capacity, and should not be liable for costs unless guardian was guilty of mismanagement or fraud--circumstances not even remotely in play.

Attorney’s Liens In Minor Compromise Cases And Attorney Withdrawal: First District, Division 1 Tackles Some Interesting Issues

Finds Attorney’s Lien Dispute Can Be Resolved in Minor Compromise Case and Analyzes Permissive Withdrawal Circumstances That Will or Will Not Give Rise to Quantum Meruit Recovery.

     Here is an unpublished decision that faced some gnarly issues regarding jurisdictional and quantum meruit recovery issues in an attorney’s lien situation where an attorney obtained a mandatory withdrawal in a contingency case. Interestingly enough, the appellate court disagreed with the trial court’s assessment, finding the withdrawal was permissive and was not of a species that should allow for quantum meruit recovery—reversing a lower court’s order requiring satisfaction of the lien out of settlement proceeds.

     In Noskevich v. Eden Medical Center, Case No. A125152 (1^st Dist., Div. 1 Mar. 3, 2010) (unpublished), the lower court granted a lien to plaintiff minor’s (represented by her mother/guardian ad litem’s) former attorneys in the amount of $23,061.77, payable out of the minor compromise settlement proceeds. The Court of Appeal reversed the orders enforcing payment of the lien.

Minors/Disabled Adult’s Compromise: Settlement During Appeal Has Its Own Settlement Procedures

Recent Fourth District, Division Two Decision Shows How California Rule of Court 8.244(d) Works In Practice.

            California Rules of Court, rule 8.244(d) provides:  “If a guardian or conservator seeks approval of a proposed compromise of a pending appeal, the Court of Appeal may, before ruling on the compromise, direct the trial court to determine whether the compromise is in the minor’s or the conservatee’s best interests and to report its findings.”  The next case we discuss illustrates the operation of this provision in “real time” and also demonstrates that cases can be settled even though the cause has been submitted to the appellate court for a ruling.

            In Sulzmann v. Colton Joint Unified Sch. Dist., Case No. E040853 (4^th Dist., Div. 2 Sept. 16, 2008) (unpublished), a disabled high school student, through her guardian ad litem, sued School District defendants for negligence in failing to perform certain life-saving measures after she collapsed on campus.  As a result, disabled adult suffered brain damage and lived in a vegetative state.  The trial court granted summary judgment to all defendants, and plaintiff appealed.  The Fourth District, Division Two issued a tentative appellate decision, prior to argument, affirming as to some defendants and reversing as to others—with the tentative reversal encompassing the School District.  (The Fourth District, Division Two is the only appellate division in the state to actually issue tentative decisions to the parties before argument.)  After issuance of the tentative opinion, the parties reached a settlement and asked that the appeal be dismissed. 

            The Court of Appeal, on its own motion, directed the superior court to conduct a hearing and make findings that the settlement was in the best interests of the plaintiff under rule 8.244(d).  The superior court found the settlement to be fair, and the appellate panel agreed.  The School District agreed to pay $1.3 million.  From that amount, there were deductions of $184,825 in unpaid medical charges/liens and $411,220 in unpaid attorney’s fees/expenses, leaving a remainder of $703,955—which would be used to purchase a $500,000 annuity, pay for future additional expenditures, and set up a $141,203 special needs trust. 

            Based on the fairness of the settlement, the Court of Appeal reversed the judgment under Code of Civil Procedure section 128(a)(8) as to School District and dismissed the appeal as to the remaining defendants.

            In our August 8, 2008 post, we discussed minor’s compromises and certain fee award guidelines.  This case illustrates that fees exceeding 25% of the gross settlement proceeds will be approved in certain situations.   The fee awarded in Sulzmann was about 31.6%, reflecting the hard fought nature of the overall litigation and plaintiff’s pending appellate win against a governmental entity.   

Conflicting Attorneys’ Claims In Minor’s Compromise Proceedings: Appellate Split Of Opinion On Whether Trial Court Can Determine in Probate Code Section 3601 Proceeding Or Recourse Must Be Had In A Separate Action

Part 2 of 2—Fourth District Divisions Are Split on the Issue.

            In Part 1 of 2 of our discussion on minor’s compromise (see August 10, 2008 post), we explored the statutory grant in Probate Code section 3601 regarding approval of attorney’s fees in minor’s compromise proceedings, augmented by a look at certain superior court local rules and unpublished appellate decisions construing some of the local rules.  Now, we explore the second topic flagged in our August 10, 2008 post.

            Frequently in minor’s compromise cases, there are successive or multiple attorneys involved depending on the progress of reaching a resolution or the difficulty of the personal injury issues.  Once a settlement is reached, there can be disagreements between the attorneys and minor’s guardian ad litem about what percentage of fees should be recovered by each attorney.  Can these disputes be resolved in the Probate Code section 3601 proceeding or must an independent action be commenced to break the impasse?  We explore the jurisprudence on this particular question, although the reality is that there is a split of appellate thinking on the answer to the inquiry.

            In Goldberg v. Superior Court, 23 Cal.App.4^th 1378, 1382 (1994), the Fourth District, Division One issued mandate vacating a lower court’s determination about the reasonable value of a chiropractor’s fees in a minor’s compromise case in a section 3601 proceeding.  Division One interpreted section 3601 as allowing the trial court to determine and authorize payment of reasonable expenses to the chiropractor, but that the court did not have jurisdiction to determine the reasonable value of the practitioner’s services—this had to be determined in a separate action. 

            Goldberg was followed one year later in Law Offices of Stanley J. Bell v. Shine, Browne & Diamond, 36 Cal.App.4^th 1011, 1020-1021 (1995).  Bell did involve a dispute between successive attorneys and client over how their respective fees would be divided from the ultimate settlement fund.  The Court of Appeal found that a probate court in a section 3601 proceeding did not have jurisdiction over any fee dispute between two attorneys quarreling over the division of the fee or over any dispute between guardian ad litem and an attorney about what fees were reasonably awarded. 

            The Fourth District, Division Two, in Curtis v. Fagan, 82 Cal.App.4^th 270, 276-280 (2000), parted company from the approach adopted in Goldberg and Bell.  In a comprehensive survey of section 3601 and earlier decisions, Acting Presiding Justice Hollenhorst (on behalf of a 3-0 panel) determined the earlier decisions had ignored the unambiguous language of section 3601, a provision that allowed expressly for the determination of competing liens for reimbursement of expenses, costs or fees.  “When presented with claims by more than one attorney in [a section 3601] action, each contending that he or she provided services at the direction of the minor’s guardian, the trial court must decide the validity of each claim.  In doing so, it may consider the evidence presented and determine a reasonable amount to be paid to each attorney.  The attorneys are not required to file an independent action against the minor’s guardian in order to obtain such determination.  To require the filing of such independent action misinterprets the language in section 3601, subdivision (a), and leads to an absurd result.  That is precisely what Goldberg and Bell did, and why we decline to follow those opinions.”  (Id. at 279.)

            The Fourth District, Division Three weighed in on this appellate split, a little more than a year later, in Padilla v. McClellan, 93 Cal.App.4^th 1100 (2001).  There, a second attorney who helped consummate the settlement in a minor’s compromise proceeding was disappointed when the trial court awarded second attorney 30% of the fees versus 70% of the fees to the first attorney saddled with a substantial amount of early work and discovery in the litigation that eventually produced the settlement.  Second attorney appealed as an objector, arguing the lower court lacked jurisdiction under section 3601 to make the rulings that it did.  Confronting the split in thinking on the issue between Curtis and the Goldberg/Bell line of cases, Justice Rylaarsdam—the author for a 3-0 panel of Division 3—concurred with the holding in Curtis, “finding it well-reasoned and more persuasive thanBell and its antecedents.  For that reason, we decline to follow those earlier decisions.  The court had jurisdiction to determine the allocation of fees between claimant [first attorney] and objector [second attorney].”  (Id. at 1106.)  The trial court in Padilla had conducted an evidentiary hearing, and Division 3 found it was unnecessary to conduct a full-blown trial given that lower courts determine the reasonableness of fees every day by ruling on motions.  “On the other hand, filing a separate action potentially engages the minor and the guardian in another lawsuit, delays resolution of the issue, and wastes everyone’s resources.”  (Id. at 1107.) 

            BLOG BONUS COVERAGE—The Curtis court, however, did reverse the fee award because the claiming attorney did not apportion his work between a fellow car passenger and the injured minor. The appellate court remanded for an apportionment of the joint work to each client.  (Curtis, supra, 82 Cal.App.4^th at 280.)  This result is in harmony with Fresno County Superior Court Local Rule 2.8.4.D, which requires that injured parents claiming reimbursement of medical and other expenses must pay their proportionate share of attorney’s fees (separate from the minor) except in cases of hardship. 

Award Of Attorney’s Fee In Minor’s Compromises—Probate Code Section 3601 Is The Standard, But Know Your Own Local Superior Court Rule

Trial Courts Possess Discretion to Raise or Lower 25% Fee Award Benchmark; Local Rules Determine Whether Awards Are Based on Gross or Net Settlement Proceeds.

            The nice aspect to blogging is receiving reader questions about fee award issues in different practice areas.  Recently, we received one about award of fees in minor’s compromise proceedings.  That question has inspired a two-part post.  Part 1, which follows, concerns the general standards governing fee awards in minor’s compromises.  Part 2, which will follow on another day, explores whether the issue of reasonableness of attorney’s fees (or, for that matter, expenses by outsiders like physicians) is determined in the section 3601 proceeding or needs to be litigated in a separate action.

            For now, here is Part 1 on the general standards governing fee awards in this practice area.

            Under the American Rule, one usually looks for a contract or statute on which to base fee entitlement.  In this area, a statute is involved.  Probate Code section 3601(a) is the operative one, providing the trial court “shall make a further order authorizing and directing that reasonable expenses, medical or otherwise and including reimbursement to a parent, guardian, or conservator, costs, and attorney’s fees, as the court shall approve and allow therein, shall be paid from the money or other property to be paid or delivered for the benefit of the minor ….”  California Rules of Court, rule 7.955 states that the lower court must use a reasonable fee standard in section 3601 proceedings and has discretion to approve as well as allow fees under a contingency fee agreement if the arrangement is made in accordance with law (e.g., Bus & Prof. Code sec. 6146; Fam. Code sec. 6602) and is reasonable “under all the facts and circumstances.”

However, many local superior court rules provide more quantitative and qualitative clarity to the decision making process.  Many rules, for example, indicate that the lower court should in ordinary cases use as a guideline an attorney’s fees award in the amount of 25% of the net settlement amount (with “net settlement” being defined various ways, but usually meaning deduction of (1) all costs from the gross settlement amount, or (2) reimbursable medical and legal costs).  According to many local rules, any award over 25% is considered extraordinary and must be supported by a strong showing of reasonableness or substantial justification.  Many of the local rules indicate the lower court should consider the factors stated in Niederer v. Ferreira, 189 Cal.App.3d 1485, 1507 (1989), which include the nature of the litigation and its difficulty; the amount of money involved; the skill required and employed in handling the litigation; the attention given to the case; the attorney’s success, learning, age and experience in the particular type of work demanded; the intricacy and importance of the litigation; the labor and necessity for skilled legal training and ability in trying the case; and the amount of time spent on the case.  Some rules also cite similar factors set out in 1 Witkin, Cal. Procedure, sec. 226, p. 286.  See, e.g., El Dorado County Local Rule 7.10.13; Marin County Local Rule 1.11.B; former Yolo County Local Rule 8.3(d).  Other local rules simply indicate reasonableness is in the trial court’s discretion, citing CRC, rule 7.955.  E.g., Fresno County Local Rule 2.8.4.D.   Many former rules having the 25% benchmark have been repealed.

Two unpublished cases are helpful in showing how section 3601 and local rules interact and are construed by appellate courts.

In Smart v. Andersson, 2003 WL 21977068 (2d Dist., Div. 6 Aug. 12, 2003) (unpublished), Attorney pursued a chiropractic malpractice action on behalf of a minor under a contingency agreement that adhered to the Medical Injury Compensation Reform Act (MICRA) sliding scale schedule in effect at the time (i.e., 40% of the first $50,000 of any recovery and 33 1/3% of the next $50,000).  Mother accepted a $100,000 settlement on daughter’s behalf and attorney filed a petition to approve the compromise under which he sought recovery of 25% of the minor’s recovery under a former local rule which provided that such fees should not exceed 25% of the settlement amount absent unusual circumstances. The trial court only approved a 15% fee award from the gross settlement amount.  The Second District, Division Six affirmed on appeal.  Attorney’s principal argument was that the 25% benchmark should have been followed.  This contention was rejected, with the appellate court observing:  “This limitation does not mean, as [Attorney] contends, that an attorney is presumptively entitled to a 25 percent fee without a showing of good cause.  Although the parties entered a contingency fee agreement providing that [Attorney] was entitled to more than 25 percent, the court was not bound by that agreement in determining the reasonable fees to be awarded.”  (2003 WL 21977068 at *3.)

            A challenge to a fee award under El Dorado County Local Rule 7.10.13—still in existence and fairly closely following the older rule under consideration in the decision next reviewed—was rebuffed in In re Hernandez, 2007 WL 842126 (3d Dist. Mar. 21, 2007) (unpublished).  Local Rule 7.10.13 has the 25% benchmark for ordinary cases, cited Niederer as setting forth factors to use in setting a fee award, indicated the “net settlement” amount meant amount remaining after all costs are deducted from the gross settlement amount, and indicated that a separate declaration needed to be filed demonstrating facts warranting an extraordinary fee request.  The local rule also reiterated that “[i]n all cases, the award of an attorney’s fees remains in the sole discretion of the Court.”  Attorney argued that the lower court, which followed the local rule, should not have deducted the minor’s medical bills before calculating the 25% interest to which he was entitled.  Attorney fine tuned his argument by contending the local rule was in conflict with section 3601.  The Third District did not find these arguments persuasive and affirmed the fee award below.  Because section 3601 only had general language, “[n]othing in this section indicates that a trial court cannot calculate attorney fees as a percentage of the net amount to be paid to the minor after deductions have been made for expenses and costs.”  (2007 WL 842126 at *2.)  Similarly, the appellate panel found that the local rule was consonant with governing law, because the Niederer factors were identical to the ones set out in PLCM Group, Inc. v. Drexler, 22 Cal.4^th 1084, 1096 (2000) for determining an award of reasonable attorney’s fees.  The local rule also did not mandate any particular amount; it merely indicated 25% was the benchmark in the ordinary case and that its “net settlement” definition was the general one to be used—however, it did state that the lower court possessed broad discretion in rendering the fee award, including a deviance from the benchmark and net settlement definition in the right circumstances.  Attorney in Hernandez failed to file a declaration justifying a higher fee, an omission that made it easy to find no abuse of discretion with respect to the fee award under review. 

            However, it does appear that trial courts usually have some general “rules of thumb” that they follow, with many fee requests over 25% needing to be justified by a declaration showing the case was extraordinary or difficult in nature (using the Niederer/PLCM factors as bases for a higher fee award.)