CALIFORNIA ATTORNEY'S FEES

Fee Clause Interpretation, Settlement: Settlement Agreement Language Only Allowed Enforcement Activities Associated With The Settlement

Other Non-Settlement Activities Were Improperly Awarded As Attorney’s Fees.

               Bodero & Associates, Inc. v. Gorman, Case No. A168856 (1^st Dist., Div. 5 Sept. 20, 2024) (unpublished) is a good example as to when four-corner contractual interpretation will govern a fee dispute, unfortunately requiring a limited remand.  Parties entered into a settlement agreement with standard terms, requiring payment of a monetary judgment if there was a breach of the settlement, requiring payment of potential fees and costs if there was a breach of the settlement, and otherwise requiring no fees and costs expended previously in the case being awarded to other side.  Plaintiff was not paid, obtained judgment for the specified amount and requested all attorney’s fees since the action was filed.  The lower court granted the fee request, but that led to a reversal.  The problem was that the fee award was not calibrated to the settlement language only relating to fees incurred to enforce the settlement agreement, not prior activities.  Reversed and remanded. 

Employment, Settlement: $226,000 Stipulated Amount For Attorney’s Fees To Plaintiffs Under PAGA Settlement Validated On Appeal

The Defense Could Not Retract From Its Agreed-Upon Settlement Amount.

               In Loudon v. DHSE, Inc., Case No. E081497 (4^th Dist., Div. 2 Aug. 8, 2024) (unpublished), defendants agreed to settle a PAGA action through a written settlement agreement providing plaintiffs were entitled to attorney’s fees of $226,000, or one-third of the PAGA settlement amount.  The defense tried to deviate from this amount down the line on appeal after approval of the fee sum, but the lower court approved the fee amount and so, too, did the appellate court.  The reviewing court believed the agreed-upon amount should prevail, but also observed that (1) plaintiffs’ counsel billed more than the agreed-upon amount before approval of the fees, and (2) individual plaintiffs’ fees would have been a lot more had the case gone to trial. 

Settlement: CCP § 664.6 Settlement Validated Where Lemon Law Plaintiff Agreed To Settle For $100,000 Inclusive Of Attorney’s Fees

Effective 1/1/2021, Section 664.6 Allows A Litigant’s Attorney To Orally Stipulate To A Settlement On The Record.

               Lemon law plaintiff was not happy with a lower court’s ruling that found a binding oral, on-the-record settlement which was reached with defendants by her attorneys to settle the case for $100,000 inclusive of attorney’s fees through an MSC ZOOM session which was recorded in stenographic and audio formats.   She argued before the lower court that the settlement was “exclusive” of fees; after a 4-day evidentiary hearing, the lower court agreed with the defense that the settlement was enforceable and that it was “inclusive” of fees.  Plaintiff appealed in Greisman v. FCA US, LLC, Case No. A166919 (1^st Dist., Div. 2 Aug. 5, 2024) (partially published), but the appellate court affirmed the settlement decision by the lower court.

               The legal issue resulting in publication was that, effective January 1, 2021, CCP § 664.6 allows a litigant’s attorney to sign a binding settlement stipulation or orally stipulate on the record that a settlement was reached, abrogating the former rule that litigants had to endorse the settlement under the Levy decision which was superseded.  With respect to whether substantial evidence supported the lower court’s conclusion, it did:  the lower court credited the court reporter’s stenographic and audio evidence that “inclusive” was the word used.  Not to mention that the lower credited the MSC judge’s statement on the record that the settlement for $100,000 was reached despite whatever terms plaintiff reached with her attorneys between themselves.

Employment, Fee Clause Interpretation, Prevailing Party, Settlement, Special Fee Shifting Statutes: Denial Of Labor Code Section 1194 Attorney Fees To Plaintiffs Who Incurred Post-Settlement Fees After Employer Breached The Settlement Agreement Reversed

Because The Fees Provision In The Parties’ Settlement Agreement Did Not Address Fees Incurred Post-Settlement, Plaintiffs Were Entitled To Recovery Under Section 1194, But Only As To Fees Incurred In Conducting Discovery And Litigating To Trial, Not In Enforcing The Settlement Agreement.

            In Lorta v. Bishop, Case No. G062166 (4^th Dist., Div. 3 February 13, 2024) (unpublished), five employees, who had sued their employer for recovery of wages, filed a motion seeking attorney fees of $331,261.25 – based on a $265,009 lodestar and a 1.25 multiplier – after employer failed to comply with the parties’ stipulation for settlement.  Plaintiffs incurred the fees post-settlement by conducting discovery and preparing for trial, and by enforcing the settlement agreement, and claimed entitlement to the fees under Labor Code sections 1194 and 226, and Code Civ. Proc. section 1021.5.  Defendant argued that because there was no trial or determination by the trial court on the merits of Plaintiffs’ claims, Plaintiffs were not prevailing parties under sections 1194, 226, and 1021.5, and not entitled to statutory fees.  Defendant further argued that Plaintiffs had prevailed only in enforcing the settlement agreement, which amounted to a breach of contract claim, and the settlement agreement provided that each party would bear its own fees and costs.  The trial court agreed and denied Plaintiffs’ motion for fees.

            Plaintiffs appealed and obtained a reversal and remand as to fee recovery under section 1194 – a one-way fee-shifting statute that allows employees to recover fees in a successful action for minimum wage or overtime. 

            In an opinion authored by Justice Sanchez, the 4/3 DCA found that the settlement agreement was silent as to any fees incurred after the settlement agreement – thereby entitling Plaintiffs to post-settlement attorney fees under section 1194 insofar as those fees were not incurred to enforce the settlement agreement.  In reaching this conclusion, the panel determined that the settlement agreement had the same effect as a judgment as defined under Code Civ. Proc., § 577 and constituted a recovery in a civil action within the meaning of section 1194.

Liens For Attorney Fees, Settlement: Attorney Assigned Some Of A Prevailing Party Fee Award Judgment Was Entitled To Remaining Proceeds In A Malpractice Action Settlement After Payment Of Malpractice Counsel’s Contractual Lien

Opinion Has An Interesting Discussion Of Whether A Suspended Or Disbarred Attorney Can Obtain Assignment Of A Judgment, With The Attorney Structuring The Assignment Correctly.

            In Children Solution, LLC v. Altman (Mastroianni), Case No. B317816 (2d Dist., Div. 1 Oct. 31, 2023) (unpublished), plaintiffs lost to defendants in a bench trial, with the defense receiving a $500,000 prevailing party fee award against the non-victorious plaintiffs.  Plaintiffs then sued their trial counsel for malpractice, reaching a $250,000 settlement which was approved by the lower court.  The defense subsequently assigned $345,000 of their $500k fee award to their counsel (who was suspended and disbarred, ultimately), and that counsel filed a notice of judgment lien in the malpractice action.  In approving the settlement, the lower court agreed that plaintiffs’ counsel in the malpractice case should be paid $113,500 of the $250,000 pursuant to a contractual attorney’s lien, but it denied paying the remaining balance to defense counsel holding an assignment of the partial prevailing party fee award.

            The 2/1 DCA found the lower court properly approved the settlement and allocated money to plaintiffs’ malpractice counsel.  It did, however, reverse denying payment of the remaining malpractice settlement monies to the suspended/disbarred attorney representing defendants in the first action.

            Before turning to the merits, the 2/1 DCA had to confront whether suspended/disbarred attorney could pursue the appeal in the face of the prohibition in Business and Professions Code section 6130, which provides:  “No person, who has been an attorney shall while a judgment of disbarment or suspension is in force appear on his own behalf as plaintiff in the prosecution of any action where the subject of the action has been assigned to him subsequent to the entry of the judgment or disbarment or suspension and solely for purpose of collection.”  Attorney could pursue the appeal because the partial fee award was an absolute ownership assignment, not just for collection only, so that it shows this assignment was structured correctly.

            Because an attorney’s contractual charging lien has priority over a judgment creditor’s lien, there was nothing wrong about that component of the lower court’s settlement approval/allocation order.  Nevertheless, the remaining $136,500 of the malpractice action settlement was ordered to be paid to the disbarred attorney:  no equities demonstrated that payment should have been withheld.  (Code Civ. Proc., § 708.440(b) [authorizing approval of a settlement agreement on “such terms and conditions as the court deems necessary”].)

Appeal Sanctions, Sanctions, Settlement: No Abuse Of Discretion In Trial Court’s Order Sanctioning Plaintiffs $10,000 For Failure To Execute Settlement Agreement

The Record Reflected That The Parties Agreed In Open Court To Put The Oral Settlement Agreement In Writing And That Deadlines For Payment Of Settlement Funds Would Be Triggered By Full Execution Of The Written Settlement Agreement.

            In Tricoast Builders v. Frederick, Case No. B307825 (2d Dist., Div. 6 October 18, 2021) (unpublished), homeowner defendants/cross-complainants in a construction defect case moved ex parte for an order to show cause why the oral settlement agreement, which had been reached months earlier in open court during a mandatory settlement conference and subsequently reduced to writing, had not been signed by plaintiffs/cross-defendants builder and its principal (who also served as one of builder’s attorneys) and for $25,627.51 in monetary sanctions. At a continued hearing on homeowner’s motion, the trial court awarded $10,000 in Code Civ. Proc., § 128.5 sanctions against builder and its principal, jointly and severally, instructed the court clerk to execute the settlement agreement on behalf of builder and its principal, and ordered that the sanctions be paid from the portion of settlement that was to be paid to builder. 

            The 2/6 DCA rejected both arguments advanced by builder and its principal on appeal – that the trial court lacked jurisdiction to enforce the settlement agreement, and that the oral settlement agreement was not contingent upon the preparation of a written agreement.  First, although the MSC judge did not retain jurisdiction under Code Civ. Proc., § 664.6 because one of the parties to the case was not present at the MSC, that party subsequently signed the written settlement agreement  thereby making the settlement agreement enforceable against it – along with the other parties who were present at the MSC. Second, the record showed that the parties agreed that a written agreement would be prepared, that the written agreement was consistent with the oral settlement agreement’s terms made in open court, that the deadlines for making the settlement payments would be triggered by the date the written settlement agreement was fully executed, and that builder/its principal did not communicate with homeowners until after the OSC and motion for sanctions was filed. The panel found no abuse of discretion in the trial court’s imposition of sanctions given that builder’s and its principal’s unreasonable delay caused homeowners to incur the expense of applying for the OSC and obtaining a court order authorizing release of the $420,000 in settlement funds owed to them.

            Although finding builder’s/its principal’s arguments on appeal to be unsupported, the 2/6 DCA did not find their appeal to be so void of merit so as to justify granting homeowners’ request for $5,313 in appeal sanctions against builder/its principal.

Consumer Statutes, Settlement: Attorney’s Fees Award In Lemon Law Case Affirmed As To Settling Party’s Responsibility, With Other Party Not Agreeing To Pay Fees Not Responsible

Given Merits Judgment Was Paid, Other Party Was Not Responsible For Fees.

            The next case we post on, Carter v. Mike Thompson Recreational Vehicles, Case No. G058205 (4^th Dist., Div. 3 Sept. 14, 2021) (unpublished), shows how care needs to be given to drafting settlement agreements as far as preserving attorney’s fees exposure to different defendants.  Justice Bedsworth authored the 3-0 panel decision.

            What occurred here is that manufacturer EHGNA and dealer Thompson entered into a settlement agreement for a lemon law dispute.  Although both defendants were liable to fund the merits settlement, only ENGNA was liable for fees.  That settlement was dispositive on appeal.  EHGNA went into Canada receivership, such that plaintiff car owner shifted sites to Thompson as far as fee recovery.  That did not work.  Both the lower and appellate courts honored the settlement agreement entered into between the parties.  Only EHGNA, not Thompson, was responsible for fees, with plaintiff agreeing to this allocation such that there was no unenforceable waiver of lemon law fees given the bargain between the parties. 

Fee Clause Interpretation, Settlement: Post-Settlement Fee Efforts Were Not Compensable Under Specifically Crafted Fees Clause Agreed To By The Parties

About $2.2 Million In Fees, Plus Multiplier, Denied To Plaintiff In Supplemental Fee Request.

            Willis v. L.A. County Waterworks Dist. No. 40, Case No. F082766 (5^th Dist. May 26, 2021) (unpublished) is an example of where a carefully crafted fees clause in a settlement agreement may govern supplemental fee requests by a claiming party.

            This had to do with a plaintiff/class representative in the Antelope Valley Groundwater cases which, previously, had been awarded pre-settlement fees of about $3.8 million.  The parties reached a settlement agreement allowing for post-judgment fees under very specific circumstances.   Plaintiff moved for supplemental fees of $1.558-2.143 million plus a positive multiplier.  However, both the trial and appellate courts agreed the supplemental fee request should be denied because the predicate “triggers” for a supplemental fee request were not met, per the settlement agreement fees clause.  No extrinsic evidence was introduced, such that the review of the “triggers” was a de novo look-at, and the fees clause did not allow for supplemental fee recovery. 

Settlement: Lack Of Mutual Assent Under Settlement Agreement On Attorney’s Fees Allocation Issue Rendered the Settlement Unenforceable

That Vacated $77,980 In Attorney’s Fees And $12,144.45 In Costs In Favor Of Settling Plaintiff.

            In Vasquez v. Jameson Management, Inc., Case No. D077598 (4^th Dist., Div. 1 May 20, 2021) (unpublished), plaintiff/former employee and defendant/former employer tentatively agreed to a letter settlement on the eve of a FEHA disability trial by which financially distressed defendant agreed to settle for $12,000, but nothing in the letter contained a discussion about allocation of attorney’s fees—although earlier discussions certainly showed this was a material term.  (In earlier discussion, some proposals left the fees issue silent and others indicated fees were included in the offers.)  A lower court subsequently confirmed the letter settlement, awarding plaintiff $77,980 in attorney’s fees and $12,144.25 in costs in addition to the $12,000 base settlement amount.  (Plaintiff had requested $222,230 in fees and $12,144.25 in costs.)

            The 4/1 DCA reversed, finding there had been no mutual asset to any attorney’s fees allocation based on the specific circumstances.  Fee allocation was a material term, but there was no material meeting of the mind on this important issue.  The appellate court questioned whether CCP § 998 “silence” cases could be applied in a settlement agreement context.  In this case, the absence of any reference to fees in the letter agreement demonstrated no enforceable agreement was reached, such that it was improper for the lower court to supply a missing material term.  That means the judgment was reversed and the parties returned to status quo position.

            However, the appellate panel was careful to observe that this was driven by the specific factual circumstances of the case—there was no broad-brush implication that silence regarding fees in a settlement agreement necessarily negated contract formation or that attorney’s fees were always a material term.  It depends on the facts!

Prevailing Party, Section 1717, Settlement: “Dismissal Pursuant To A Settlement Of The Case” Language In Civil Code Section 1717 Does Not Encompass Settlement With CCP § 664.6 Jurisdiction and Attorney’s Fees Clause Covering Post-Settlement Efforts

Appellant’s Construction Would Thwart Settlement Efforts.

            Appellant in Wash v. Wash, Case No. F077486 (5^th Dist. Mar. 11, 2021) (unpublished) earlier appealed an order enforcing a settlement agreement with a contractual fees clause, an appeal that he lost.  Respondent requested appellate fees of $18,216.98, with the trial judge awarding $9,321 against appellant.  Although the fee award was affirmed on appeal by the Fifth District, appellant made an argument that section 1717 preclude fees where an action was achieved through a “dismissal pursuant to a settlement of the case.”  Aside from the fact that no dismissal of this sort was of record in the superior court, the appellate court balked at such an interpretation where parties agreed that the lower court would retain jurisdiction under CCP § 664.6 to supervise the settlement and award fees to enforce the settlement.  It found that an action cannot be characterized as “dismissed pursuant to a settlement of the case” where the parties are back in court arguing over the settlement.  Here is the analysis with respect to rejecting this argument: “[Appellant’s] contrary statutory interpretation creates a legal barrier that thwarts the intention of parties who include any attorney fees provision in their settlement agreement with the expectation that the party who prevails in a proceeding to enforce the agreement will not be out of pocket for the attorney fees incurred in the enforcement proceeding.  Such a barrier would undermine settlements, rather than promoting them as a method of finally resolving civil disputes.”

            BLOG HELLO—The winning attorney for Respondent was Daniel L. Harralson, who practices in Fresno.  Dan helped in the appellate clerk’s office at the Fifth District while he was in law school and while co-contributor Mike was a clerk to George Zenovich at the time.  Congratulations, Dan!

Consumer Statutes, Fee Clause Interpretation, Settlement: $65,000 Attorney’s Fees Award And $7,987.40 Costs Award Under Lemon Law Settlement Stipulation Are Affirmed On Appeal

Lower Court Properly Harmonized Seemingly Conflicting Terms Of Settlement Stipulation.

            In Boykin v. Premier Universal, Inc., Case No. F078689 (5^th Dist. Dec. 17, 2020) (unpublished), the parties settled a lemon law case, but reserved the issue of recovery of attorney’s fees for a subsequent motion.  The problem was that the settlement stipulation had conflicting terms: (1) “fees and costs are to be resolved by motion to the Court;” and (2) “there will be no prevailing party status and no admission of liability.”  The defense seized on (2), in opposing a fees/costs motion, to boldly contend that plaintiff stipulated that there would be no prevailing party such that fee entitlement did not lie.  The lower court harmonized the two settlement provisions and determined fees/costs were justified to the tune of $65,000 in fees and $7,087.40 in costs.  The Fifth District affirmed, because the (1) settlement stipulation would be rendered meaningless, and the trial judge deciding the issue was the one presiding over the settlement colloquy such that any reasonable inferences on stipulation construction was guided by the substantial evidence rule.  (Winograd v. American Broadcasting Co., 68 Cal.App.4^th 624, 627, 632-633 (1998).)

Section 1717, Settlement: Settlement Agreement Silent As To Allocation Of Attorney’s Fees/Costs Did Not Bar Section 1717 Fee Recovery By Prevailing Alter Ego Defendant

$15,806.50 Fee Recovery Affirmed, Plus Fees/Costs On Appeal.

            The next case shows how one needs to make fees/costs recovery explicit under a settlement agreement; if not, a later prevailing party not involved may get attorney’s fees and costs.

           In J Sylvester Construction, Inc. v. Standeford, Case No. G057337 (4^th Dist., Div. 3 Jan. 8, 2020) (unpublished), contractor sued a subcontractor performing unlicensed plumbing work under a subcontract with a prevailing party fees clause.  Later, both parties entered into a settlement agreement that was silent as to an allocation of attorney’s fees and costs.  However, contractor continued to prosecute a suit against individual defendant Standeford based on an alter ego theory, with defendant defensing that claim.  The lower court then awarded $15,805.50 in fees pursuant to the contractual fees clause and Civil Code section 1717.

            The 4/3 DCA, in an unpublished decision authored by Justice Moore, affirmed.  The problem for appellant was that the settlement did not address an allocation of attorney’s fees such that fees still could be awarded to the alter ego prevailing defendant.  The appellate court also directed that Standeford was entitled to fees on appeal for winning. 

Allocation, Fee Clause Interpretation, Lodestar, Prevailing Party, Reasonableness Of Fees, Section 1717, Settlement: Reasonable Discretion Exercised In Awarding Defendant Only 20% Of Requested $177,712 In Fees

The Legal Principles Of Civil Code Section 1717 and Santisas Governed.

            Both parties appealed the fee results in Rusnak/South Bay v. Glukel Group, Case No. B286513 (2^nd Dist., Div. 3 Sept. 27, 2019) involving a dispute between landlord and tenant – with tenant plaintiff advancing contract and tort claims against landlord. 

            Tenant dismissed its lawsuit during the discovery phase, before depositions took place, and Landlord moved for an award of $177,712 in attorney fees under the lease’s attorney fee provision which entitled the prevailing party to fees.  Although the trial court granted the fee motion, it awarded Landlord with only 20% of the requested fees – apportioning between the contract and tort claims pursuant to Civ. Code section 1717(b)(2), and reducing for excessive and unreasonable fees.  

            On appeal, Landlord argued that it was entitled to all of the fees pursuant to the lease contract, and Tenant argued that Landlord was not the “prevailing party” on the tort causes of action.

            The 2/3 DCA affirmed.  The apportionment and 80% reduction were proper pursuant to the legal principles of Santisas v. Goodin (1998) 17 Cal.4^th 599 [our Leading Case No. 6] and Civ. Code section 1717(b)(2).  First, as to the contract claims, section 1717(b)(2) bars recovery of the fees incurred to defend plaintiff’s contract claims where an action has been voluntarily dismissed as it was here – with Santisas defining the extent of such preclusion to include cases involving a contract that on its own terms authorizes recovery of those fees. 

            As to Tenant’s argument that Landlord was not the prevailing party on the tort causes of action, the 2/3 DCA found the argument meritless – citing the holding in Santisas that the “prevailing party” of tort claims resolved by  voluntary dismissal is governed by the clear and unambiguous language of the contract for purposes of awarding attorney fees.  Here, the relevant fee provision defined “prevailing party” to include “without limitation” a party “who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party . . . of its claims.”  Tenant abandoned its noncontract claims, making Landlord the prevailing party under the unambiguous terms of the parties’ contract. 

Liens For Attorney’s Fees, Settlement: Judgment Creditor’s Settlement And Release Of Judgment Debtor Did Not Release Interference Claims Against Judgment Creditor’s Attorney Obtaining Judgment Against Judgment Debtor

Interference Claim Was Righteous And Not Released By Judgment Debtor’s Unilateral Settlement With Judgment Creditor.

            Mancini & Associates v. Schwetz, Case No. B290498 (2d Dist., Div. 6 Sept. 4, 2019) (published) goes to show you that a client/judgment creditor has no ability to unilaterally release claims that client’s attorney has against a third-party judgment debtor. 

            Attorney obtained a substantial jury verdict for his client/judgment creditor against defendant/judgment debtor, with the attorney’s retainer agreement indicating that the attorney would receive a percentage of recovery and costs as well as an attorney’s lien against any recovery.  Without attorney’s knowledge or consent, client/judgment creditor entered into a settlement agreement with judgment debtor, releasing that party.  Judgment creditor’s attorney then sued judgment debtor for interference with his retention agreement and attorney’s lien rights, obtaining a $409,351 judgment against judgment debtor.

            On appeal, judgment debtor principally relied on the release in the settlement agreement with judgment creditor.  However, that agreement did not bind judgment creditor’s attorney who was not a party to the settlement, given that interference by a third party with attorney’s lien rights is a cognizable claim in California.  (Little v. Amber Hotel Co., 202 Cal.App.4^th 280, 291 (2011).)  As observed at the start of the opinion, “Does this release preclude the attorney from pursuing his costs and fees from the defendant [judgment debtor]?  Of course not.” 

Settlement: 2/4 Cal Court Of Appeal Holds That Stipulated Judgment Is An Unenforceable Penalty

And The Court Explains How The Stipulated Judgment Could Have Been Structured So As To Be Enforceable.

        "The principal issue in this appeal is whether the stipulated judgment constitutes an unenforceable penalty." Red & White Distribution, LLC, et al. v. Osteroid Enterprises, LLC and cross-complaint, B291188 (2/4  8/9/19) (Currey, Manella, Willhite).  Here, "the parties entered into a settlement agreement providing that if R&W defaulted, the Osteroid Parties could file a stipulation for entry of judgment, with the amount of the judgment being $700,000 more than the settlement amount plus interest and attorneys' fees." The Court of Appeal concluded that the additional $700K was an unenforceable remedy under Civ. Code section 1671(b), pertaining to whether a liquidated damage clause is valid or unenforceable.

         And all this is well-established law under Ridgley v. Topa Thrift & Loan Assn., 17 Cal.4th 970 (1998) and Greentree Financial Group, Inc. v. Execute Sports, Inc., 163 Cal.App.4th 495 (2008). So why did the Court bother to publish?

        We believe it is because the trial judge declined to follow Ridgley and Greentree, believing that it could instead follow Jade Fashion & Co., Inc. v. Harkham Industires, Inc., 229 Cal.App.4th 635 (2014). And so the Court of Appeal performed its educational role by explaining that the cases are not inconsistent, and that the stipulation, had it been structured à la Jade Fashion, could have been enforceable. 

        What would an enforceable stipulation require? An agreement to discount for timely payment of an admitted debt. Thus, the outcome of Red & White Distribution could have been an enforceable stipulation if the parties had agreed or the appellate record had demonstrated that R&W admitted it owed $2.8M, and the parties had stipulated to discount the debt to $2.1M upon timely payment, absent which the full amount would have been due.

            But that is not how the parties structured the settlement. 

    COMMENT: Co-contributor Mike Hensley represented the successful party in the Greentree appeal.  

 

 

 

 

Settlement: Seventh Circuit Court Of Appeals Affirms $10,875 Fee Award To FDCPA/FCRA Prevailing Plaintiff Who Requested $187,410 In Fees But Won Only $1,000 In Damages

Rejection Of FRCP 68 Offers And Unnecessary Running Up Of Fees Sustained The District Judge’s Conclusion Below.

            This next case is a cautionary warning for all litigants and their attorneys—settlement is sometimes the only reasonable option when the defense makes every effort to do so.  Here are the beginning two sentences of the opinion we now post on: “Sometimes settling a case is the only course that makes sense.  This case provides a good example.”

            Paz v. Portfolio Recovery Associates, LLC, No. 17-3259 (7^th Cir. May 15, 2019) (published) was a Fair Debt Collection Practices Act and Fair Credit Reporting Act case brought by plaintiff defaulting on a $69 credit card debt as against defendant debt collector which purchased the debt and attempted to collect.  Defendant made a FRCP 68 offer to settle for $1,001, plus reasonable attorney’s fees, with the parties eventually agreeing to $4,500.  However, because defendant continued to report the debt to credit reporting agencies, plaintiff filed a second lawsuit under the FDCPA and the FCRA.  Defendant again attempted to resolve the second case by making Rule 68 offers of $1,500, $2,500, and $3,501, with each including reasonable attorney’s fees and costs up through the date of acceptance.  You can guess what happened—plaintiff never responded to any of these offers. 

            Except for one violation of FDCPA and FCRA, plaintiff’s case got gutted on a defense summary judgment motion such that the case was worth a maximum of $6,000 in actual and statutory damages under the two statutory schemes (although plaintiff claimed emotional distress damages).  On the eve of trial, defendant offered to resolve all of plaintiff’s claims for $25,000 plus his attorney’s fees and costs to date.  Plaintiff rejected that offer, with a jury awarding just $1,000 in statutory damages on his FDCPA claim.  Plaintiff then sought $187,410 in fees and $2,744 in costs relying on FDCA’s fee-shifting provision (15 U.S.C. § 1692(k)(a)(3)).  The district judge awarded him fees of $10,875, which was the amount of his attorney’s work up to the point at which the $3,501 settlement offer was made.  In doing so, the district judge underscored that plaintiff’s rejection of meaningful settlement offers precluded a fee award in such disproportion to his trial recovery (put another way, plaintiff only had limited success).  Plaintiff also received costs totaling $3,500.

            The Seventh Circuit saw no abuse of discretion in the challenged fee award.  The defense was reasonable along the way, attempting to settle at most junctures of the case.  Although the defense settlement offers disclaimed liability, they also allowed for a judgment to be entered so that the liability disclaimer effectively was a “dead letter.”  The $187,410 fee request was wildly disproportional to the eventual $1,000 damages award, with there being very little chance plaintiff would obtain much of a “bigger payoff.”  Reduced fee award affirmed.

Fee Clause Interpretation, Settlement: No Abuse of Discretion And No Error By Trial Court In Finding The Parties’ Settlement Agreement Valid And In Awarding Attorney Fees Of $83,340.22 To Defendants For Enforcement Of Settlement Agreement

Plaintiff Hit With Attorney Fees Provision In Valid Settlement Agreement After Unsuccessfully Attempting To Back Out

        In Martello v. Buck, Case No. B285001 (2d Dist., Div. 1 March 1, 2019) (unpublished), Plaintiff Doctor sued Defendants Patient husband and his wife for defamation, assault, and intentional infliction of emotional distress after Defendants expressed dissatisfaction with Plaintiff’s billing practices on the internet. Defendants filed a cross-complaint for malicious prosecution, claiming Plaintiff had pursued litigation to collect on medical “balance billing” that Plaintiff knew to be illegal as they alleged she had been ordered by the Dept. of Managed Health Care to cease and desist from balance billing her patients. Balance billing is the practice of charging patients for the amount of the bill not covered after the insurance company pays its obligation, and patient has paid his/her deductible, copays, etc. It is illegal in California.

        In the underlying case, Plaintiff Doctor had obtained a default judgment against Defendants for the unpaid balance of the medical bill, and had attempted to collect by forcing a sale of Defendants’ home. Defendants were able to obtain relief from the default judgment and avoid sale of their home.

        The parties settled their claims against each other after months of negotiations. However, Plaintiff changed later changed her mind and refused to enter the settlement agreement in court. Afterward, following a bifurcated trial, the trial court found the settlement agreement to be a valid contract and dismissed the case pursuant to the agreement. The trial court also awarded Defendants $83,340.22 in attorney fees, pursuant to the terms of the settlement agreement, for their efforts in enforcing the agreement. Plaintiff appealed.

        In considering Plaintiff’s arguments on appeal, the 2/1 DCA concluded that the trial court had properly held a trial to determine if a valid settlement agreement existed between the parties, and had not abused its discretion by admitting the parties’ confidential settlement communications into evidence to determine whether a binding agreement existed. The 2/1 DCA then turned to Plaintiff’s argument that the trial court erred in awarding attorney fees to Defendants because the settlement agreement provided attorney fees for the enforcement of the agreement – not to establish whether there was a settlement agreement. It found the purpose of determining whether the settlement agreement was valid was to determine whether it could be enforced against Plaintiff, and that the immediate consequence of the trial was enforcement of the agreement and dismissal of the case – therefore no error. The trial court had properly awarded attorney fees to Defendants for enforcement of the settlement agreement.

Section 998, Settlement: Vagaries In Acceptance By Offeree Cannot Be Adjudication Through Motion To Enforce A Settlement Under CCP § 664.6 And CCP § 998 Before Entering Judgment

Entry Of Judgment Based On 998 Offer Is A Ministerial Act That Cannot Involve Adjudication Of Dispute Over 998 Acceptance—Presumably An Independent Action Was The Remedy.

            In Coleman v. Sagar, Case No. B283005 (2d Dist., Div. 5 Oct. 9, 2018) (unpublished), there was a brouhaha over whether defendant properly accepted a CCP § 998 offer through an electronic signature by the defense attorney, but not the defendant party.   Defendant moved to enforce the settlement pursuant to CCP §§ 664.6 and 998. The trial judge determined the acceptance was valid, but the appellate court reversed.

            The 2/5 DCA determined that a trial court may not resolve 998 acceptance disputes when entering judgment based on the 998 offer, given that only a ministerial act is at issue. The problem here was an intersection of procedural principles which may want to guide litigants in such a circumstance in the future. The first is that a settlement agreement cannot be enforced under section 664.6 if just signed by a party’s attorney; that meant that the normal expedient enforcement motion procedure could not be used under 664.6. With respect to 998, the entry of a judgment is purely ministerial, but neither the court clerk nor trial court can resolve acceptance or other ambiguities.

            Where does that leave everyone is this case as far as a remedy? Footnote 2 of the opinion suggests the solution—probably a separate suit in equity or some amendment of the pleadings to set up the issue. There you go!

Ethics, Settlement: Attorneys, Under Settlement Agreement Of Fee Dispute With Ex-Clients, Did Not Have To Reveal Potential Legal Malpractice Claims For Purposes Of Entering Into Valid Settlement Agreement Over Fees Dispute

Ex-Clients Were Not Entitled To Rescind Settlement Agreement For Purported Ethical Violations.

            The First District, Division 1, in Property California SCJLW One Corp. v. Leamy, Case No. A152959 (1^st Dist., Div. 1 Aug. 9, 2018) (published), had to confront whether ex-clients entering into a settlement agreement over a fee dispute with their former attorneys could rescind the settlement based on allegedly nondisclosed legal malpractice claims against their attorneys. The appellate court answered “no,” reasoning that (1) punishment for California Rules of Professional Conduct ethical violations was a matter within the purview of the State Bar; and (2) ex-clients “do not cite to any authority holding that failure to comply with the ethical rules entitles a client to rescind a settlement agreement for attorney fees” (Slip Op., pp. 16-17).

Settlement: Be Very Careful About Referring Attorney's Fees Issues To Federal Magistrate Judges

Gail Killefer, ADR Administrator For The USDC, Central District, Offers A Practice Tip For Mediators And Parties In Federal Cases.

Here's the tip from Gail Killefer:

"Motions for attorney's fees may not be referred to a Magistrate Judge in the Central District unless the parties have consented to a Magistrate Judge for all purposes.  See General Order 06-01."

Thus, it is beyond risky to reserve and refer an attorney's fees issue to a Magistrate Judge -- unless the parties have consented to the Magistrate Judge for all purposes (in which case the Magistrate Judge is functioning much like a Federal Judge.) 

HAT TIP to Gail Killefer!

 

 

 

Reasonableness Of Fees, Settlement: $47,604.50 Fee Award To Defendants For Enforcing Settlement Agreement Affirmed On Appeal

Nothing Demonstrated Agreement Was Protected By Mediation Privilege And Failure To Object To Particular Entries Waived Any Real Challenge To Reasonableness Of Claimed Fees.

            Although there was some initial confusion on whether defendants wanted to enforce a settlement agreement with a “prevailing parties” fees clause, it looks like defendants took the plunge and then sought $48,072 in fees for efforts to enforce the settlement agreement. The trial judge had granted summary judgment to the defense as far as enforcing the settlement agreement, subsequently granting the defendants’ request for most of claimed fees to the tune of $47,604.50 in Baldwin v. Funk Shui, LLC, Case No. B272450 (2d Dist., Div. 1 June 1, 2018) (unpublished).

            Plaintiff’s challenge to the fee award did not succeed.

            Plaintiff argued that the settlement agreement was inadmissible under the mediation privilege, but that did not resonate because the written agreement was reached nine days after the conclusion of the mediation. With respect to the amount of fees awarded, plaintiff argued that unconscionable fee factors had to be considered, but the appellate court found that Rule of Professional Conduct 4-200 only applied to members of the State Bar but not to actual parties to the settlement agreement. The redacted billings by the defense did not prevent an evaluation of the merits of the motion. Plaintiff also failed to challenge any particular entry such that he failed to satisfy his burden as far as challenging the reasonableness of the claimed fees.

Settlement, Special Fee Shifting Statute: Ten-Day Settlement Offer Under IDEA Not Specifying Whether School District Would Pay Disabled Student’s Pre-Offer Attorney’s Fees And Costs Justified Parent In Rejecting Offer

Result Is That Matter Is Remanded So Post-Offer Reasonable Fees Can Be Awarded; Both Majority and Concurring Opinions Suggest School Districts Need To Make Their Offers Clear In Nature.

            The Individuals with Disabilities Education Act (“IDEA”) is a boutique practice involving a federal statute under which parents and school districts can resolve disputes over a disabled/special-needs child’s educational placement and schooling needs. IDEA also has a fee-shifting provision which allows the prevailing party parent to recoup reasonable attorney’s fees and costs, given that the parent is usually the person prosecuting a matter on behalf of his/her child. The school district can extend a settlement offer to the parent at least ten days before the dispute reaches an administrative hearing (known as the “ten-day offer”). The ten-day offer allows a school district to limit its exposure to fees by limiting a parent’s eligibility for fees to those accrued before the time of the ten-day offer. If the parent rejects the ten-day offer, the parent may only receive post-offer fees if the administrative hearing leads to more favorable relief than that expressed in the offer or the parent was substantially justified in rejecting the offer.

            These ten-day offer principles fully were in play in Rena C. v. Colonial School Dist., No. 17-1161 (3d Cir. May 14, 2018) (published as precedential).

            What happened in Rena C. was that the school district extended a 10-day offer in this form: “This offer is also being made in order to further limit the School District’s possible prevailing party attorney fee attorney liability. The School District offers to pay private school tuition and transportation for Parent’s unilateral placement at Delaware Valley Friends School.”

            Rena C. (the parent) rejected the offer but moved to later recover $70,000 in IDEA fees before the district court, after the parent failed to “beat” the ten-day offer based on the result in the administrative hearing, as later interpretations by the district judge and circuit court of appeals confirmed. The district judge, however, only awarded parent $7,438 in pre-offer fees because she did not receive more favorable relief at the administrative level and she was not substantially justified in rejecting the offer.

            Parent appealed to the Third Circuit Court of Appeals (based in Philadelphia), and obtained a 3-0 reversal so that she could seek post-offer fees too—with the majority opinion authored by Circuit Judge Fisher and a concurring opinion authored by Circuit Judge Greenaway, Jr.

            Lots of arguments were raised by parent, some of which did not resonate and some of which did.

            Although disturbed by the terseness of the ten-day offer, the Third Circuit found that the “tuition” offer did include the cost of one-on-one instruction and “stay-put” rights at the private school, meaning the offer was valid and parent did not receive more favorable relief before the administrative law officer.   Nonetheless, and in an important holding, the circuit court found parent was substantially justified in rejecting the ten-day offer because the absence of language dealing with attorney’s fees in the offer provided justification for rejection. In doing so, it agreed with reasoning from the D.D.C. and did not adopt the rationale from a Fifth Circuit decision.

            In his concurring opinion, Circuit Judge Greenway, Jr. had two main points to make: (1) school districts need to extend offers with more clarity than the one in the case before the circuit court, especially defining exactly what “tuition” means and making clear whether fees and costs are encompassed; and (2) parties in IDEA disputes should communicate more effectively regarding ten-day offers so as to facilitate clarification and possibilities of reaching a resolution based on those post-offer discussions.

            BLOG OBSERVATION—Co-contributor Mike attended Rutgers-Camden School of Law which is across the Delaware River and nearby Philadelphia, the base of the Third Circuit. He externed his third year for Circuit Judge (now deceased) Arlin M. Adams, who on two occasions was on the short list of putative SCOTUS candidates. Mike remembers him as a very smart, sincere, interactive jurist who he recalls very fondly.

Settlement: Howeth v. Coffelt Decision Now Published

Decision Deals With Care In Drafting Settlement/Consent Judgment Language.

            On December 2, 2017, we posted on Howeth v. Coffelt, a Fourth District, Division One unpublished decision showing how fee recovery must be obtained in a settlement/consent judgment arrangement where the remedies were narrow in nature.  We can now report that the case was certified for publication on December 8, 2017. 

Settlement: Post-Judgment Enforcement Request For Fines, Plus Attorney’s Fees, Not Allowable Under Settlement Agreement/Consent Judgment

Case Illustrates Care In Drafting Remedies Available Under a Consent Judgment Via Settlement.

            Howeth v. Coffelt, Case No. D072136 (4^th Dist., Div. 1 Nov. 30, 2017) (unpublished) is a case reminding practitioners to pay particular attention to the remedies for a consent judgment ending a dispute reached through a settlement agreement.

            Here, a driveway easement lawsuit between beachfront neighbors was ended through a settlement agreement, which included a stipulated judgment to resolve the lawsuit.  However, the settlement agreement expressly provided that a fine payment feature of the judgment was enforceable through contempt proceedings and that enforcement of the settlement agreement would occur via a separate action, with the stipulated agreement also including an attorney’s fees clause relating to any future enforcement action.

            Believing there was a breach of the judgment and settlement agreement, one party brought a post-judgment enforcement motion seeking an “interim judgment” awarding $12,000 in fines plus attorney’s fees.  The trial court found it had no continuing jurisdiction to enforce the stipulated judgment and denied the requested relief. 

            The Fourth District, Division One agreed, finding the denial order was not appealable such that the appeal had to be dismissed.    The problem was that the consent judgment was final, and the stipulated-to remedies were a contempt proceeding or a separate enforcement action rather than a post-judgment motion.  Based on that, the lower court correctly concluded it had no retention jurisdiction based on the remedies actually agreed to between the parties.  So, the lesson is, be careful how you frame the remedies and use CCP § 664.6 to allow post-judgment enforcement through a motion procedure (after making sure the trial court expressly retains jurisdiction under section 664.6 either orally, through a written order, or through a minute order to that effect). 

Consumer Statutes/Settlement: Medina Decision Now Published

$128,004.50 Fee Award Sustained Under Consumer Fee-Shifting Statutes Where $8,600 Was The Settlement Amount.

            On September 20, 2017, we posted, and co-contributor Marc on his California Mediation and Arbitration blog posted, on Medina v. South Coast Car Company, Inc., Case No. D069820 which was unpublished at the time.  In that case, the appellate court affirmed a $128,004.50 lower court fee award where a settlement under consumer fee-shifting statutes only came to $8,600, but with a reservation to allow plaintiff to seek fees under the settlement agreement.  We can now report that the case was certified for publication on September 25, 2017. 

Consumer Statutes/Settlement: Settling Car Wrongful Repossession Plaintiff Properly Awarded $128,004.50 In Attorney’s Fees And $3,738.87 In Costs Even Though Defendants Settled For $8,600

Specific Settlement Agreement Terms Shot Down The Defense’s “No Fee Entitlement” Argument.

            The defense in this wrongful repossession action under various consumer statutes with fee-shifting provisions was likely shocked by a trial court’s award of $128,004.50 in attorney’s fees and $3,738.87 in costs given that the settlement amount to plaintiff was only $8,600 subject to the determination on the fees/costs petitions.  The appellate court was not in Medina v. South Coast Car Company, Inc., Case No. D069820 (4^th Dist., Div. 1 Sept. 19, 2017) (unpublished).

            The primary obstacle for the defense was that these litigants stipulated in a settlement agreement to not dispute entitlement to fee recovery and to acknowledge plaintiff was the prevailing party for fee recovery, reserving challenged to the reasonableness of any fee request.  The defense efforts to backtrack from these settlement stipulations did not resonate on appeal.  Although one of the defendants argued the result was unfair for a holder of finance paper on the car, the appellate court indicated—aside from the settlement—that those concerns were best left considered by the Legislature. 

Fee Clause Interpretation/Settlement: Settlement Agreement’s Carve-Out Language And Broad “Related To” Language Allowed For Fee Recovery In General Contractor – Subcontractor Dispute

 

Need For Precise Draftsmanship Demonstrated By This Case.

            In Global Modular, Inc. v. Kadena Pacific, Inc., Case No. E063551 (4^th Dist., Div. 2 Sept. 8, 2017) (published), general contractor, subcontractor, and subcontractor’s general liability carrier were drawn into a dispute about water damage to a construction site.  A partial settlement was reached by all parties, with the trial judge eventually determining that general contractor was entitled to $360,000 in fees from subcontractor pursuant to the settlement agreement, finding the releases in the agreement did not prevent fee recovery.  The appellate court affirmed the fee award.  Subcontractor did agree to pay general contractor for activities in “enforcing any provision or obligation arising under” the contract, which was involved in the litigation.  The carve-out provision in the releases further cemented fee recovery, given that claims were not released for the project that were “related to” damages covered under the insurance policies.  Finally, the “related to” language did cover property damages, including attorney’s fees pursued in relation to those damages.  Obviously, precise draftsmanship was needed to provide a different result.

Civil Rights/Settlement: Plaintiff Accepting $1,000 In Rule 68 Offer Entitled To Some Amount Of Fees Under Contract Principles

District Judge Erred In Denying Any Fees Based On Incorrect Civil Rights Fee-Shifting Analysis.

            In Miller v. City of Portland, No. 14-35783 (9^th Cir. Aug. 22, 2017) (published), a civil rights plaintiff accepted a defense Rule 68 offer for $1,000 with reasonable attorney’s fees to be determined by the district court.  After plaintiff moved for fees, the district judge denied any at all based on the ground that the $1,000 award was a de minimis judgment under 42 U.S.C. § 1988, a provision with case law indicating that a nominal judgment does allow for a denial of fees by a district court.  The Ninth Circuit reversed, determining that the analysis below misfired by relying on civil rights principles rather than contractual principles in interpreting the Rule 68 offer.  By acceptance of the Rule 68 offer, plaintiff was entitled to some amount of fees, given that the offer did not reference section 1988.  Remanded to the district judge to fix some amount of fees to be awarded to plaintiff. 

4/3 DCA Trifecta: Appellate Court Issues Three Fee Unpublished Decisions

Source:  Wikipedia.  Article “Trifecta.”

Prevailing Party/Settlement: Goldenwest Plaza, LLC v. The Frank and Gertrude R. Doyle Foundation, Case No. G050766 (4^th Dist., Div. 3 Aug. 22, 2016) (Unpublished)

--Split Result Meant No Prevailing Party.

     This case was a messy partition case where differing ownership interests with disputes on management of a shopping center brought claims to either partition the property for sale or divide it in kind. In the end, the parties reached a settlement agreement by which one side agreed to buy out the other party for over $2 million but the partition in kind relief was not granted. The settlement agreement gave wide discretion to the trial court to determine if anyone prevailed. Plaintiff won a $2 million buyout, while the defense prevented a partition sale of the shopping center. Both sides moved for attorney’s fees under a contractual clause and under the partition statute. The lower court found no one prevailed, a determination affirmed on appeal. Under the settlement agreement, the lower court did not err by concluding this was somewhat of a “split” result, wrote Justice Fybel in a 3-0 panel decision, such that no side prevailed.

Sanctions: Valtierra v. Weng’s Enterprises, Case No. G051837 (4^th Dist., Div. 2 Aug. 22, 2016) (Unpublished)—CCP § 128.5 Does Not Allow Sanctions Against A Party’s Own Attorney Or Former Attorney.

     Here, a trial court granted a CCP § 128.5 sanctions award against a client’s attorney for failure to transfer files on a timely basis. The appellate court reversed because section 128.5 does not authorize a trial court to award a party sanctions against its own attorney or former attorney. However, this was not to say there are no other remedies, such as a State Bar complaint or a civil malpractice action. Justice Aronson authored this one.

Retainer Ageement: Bienert, Miller & Katzman PLC v. Patwardhan, Case No. G052667 (4^th Dist., Div. 3 Aug. 22, 2016) (Unpublished)—Statute of Limitations For Attorney Fee Collection Does Not Commence Until Attorney-Client Relationship Ends.

 

    “The Twist.”  Herman Hiller, photographer.  1962.  Library of Congress.

     In somewhat of a twist, a third-party payor for a client argued that a law firm sued too late because a four year period lapsed from the receipt of each monthly bill for legal services. Law firm countered that the limitations period expires four years after an attorney ceases to provide legal services to the client, notwithstanding the receipt of legal invoices during the representation. Law firm won based on California decisions—although many described as being “long in the tooth” or “venerable”—holding the SOL does not run until the relationship ends, with any contrary decision meaning the attorney would have to take adverse actions while still representing the client. The twist here was the third-party payor was not a client, but the appellate court—in a decision by Acting Presiding Justice Bedsworth—determined that the result did not change because of this wrinkle given that the client still might be involved in a conflict-ridden fee dispute.  Interestingly, the Court of Appeal could find no such statute of limitations case involving a law firm and a client’s third-party payor.  So this is an unpublished case of first impression.

Judgment Enforcement/Settlement: Settlement Agreement Silence On Fees Did Not Prevent Postjudgment Collection Fee Entitlement Where Labor Code Section 218.5 Provided Statutory Basis For Fees

 

Postjudgment Fee Recovery Properly Allowed Against Settling Defendant.

     Khanna v. Sonasoft Corp., Case No. H040007 (6th Dist. June 30, 2016) (unpublished) involved a situation where parties settled a wage/hour dispute under Labor Code section 218.5 under a judicially-supervised settlement agreement which was silent on fee recovery.  However, the trial court did allow postjudgment fee recovery to plaintiff.

    This determination was affirmed on appeal.  The correct analysis, to the Sixth District, was that silence on the issue of fee recovery was not fatal, where a statute (such as Labor Code section 218.5, a fee-shifting provision in wage/hour cases) allowed for recovery.  Once this statutory basis was established, postjudgment collection fee efforts were compensable under Code of Civil Procedure section 685.040.

   BLOG OBSERVATION—The result in this case was similar to the one reached by the 1/1 DCA in Sanger v. Ahn, an unpublished decision we discussed in our June 29, 2016 post. 

Settlement: Ninth And Third Circuits Determine That Unaccepted Rule 68 Offers Do Not “Pick Off” Class Actions

 

Ninth Circuit Holds That Class Representative Must Have Opportunity To Show Certification Warranted.

    On January 29, 2016, we posted on the U.S. Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 163 (2016), which held that F.R.Civ.P. 68 unaccepted offers do not moot either an individual or a class action matter (usually with both claims present in an individual/class hybrid case).  We can now report that there are some published post-SCOTUS decisions in the area.

    The Ninth Circuit, in Chen v. Allstate Ins. Co., Case No. 13-16816 (9th Cir. Apr. 12, 2016) (published), decided that the defense tender of $20,000 in settlement of individual claims under an unaccepted Rule 68 offer did not moot class or individual claims.  With respect to class claims, it determined that the putative class representative should have an opportunity under Campbell-Ewald to demonstrate that certification was warranted.  Also, the $20,000 monetary tender did not show that injunctive relief requested by the plaintiff individually had been obtained.

    About a week earlier, the Third Circuit in Weitzer v. Sanofi Pasteur, Inc., No. 14-3423 (3d Cir. Apr. 6, 2016) (precedential) also acknowledged that an unaccepted Rule 68 offer mooted neither individual nor class action claims based on Campbell-Ewald. 

December 17, 2015 Unpublished Fee Decisions—Three Reversals, Two Affirmances On Variety Of Issues

 

Allocation—Artefex LP v. Bushman, Case No. B260737 (2d Dist., Div. 6 Dec. 17, 2015) (Unpublished).

    In this one, plaintiffs won $15,000 on a contract breach claim after voluntarily dismissing tort claims, with the trial judge then awarding $191,256 in fees and $11,778.37 in costs based on a fees clause.  The 2/6 DCA reversed based on its perception that the trial judge should have apportioned costs between the compensable contract and noncompensable tort claims under the circumstances.  It was convinced that the contract and tort claims did not share a common nucleus of facts.

Consumer Statutes—Calande v. Surf and Sand, LLC, Case No. H038679 (6th Dist. Nov. 19, 2015, mod. Dec. 17, 2015) (Unpublished).

    Defendants mobile owner/operator appealed a denial of fees requests, claiming they were entitled to them based on Civil Code section 1942.5(g), a retaliatory eviction fee-shifting provision, and Civil Code section 798.85, a Mobile Residency Law fee-shifting provision.  The appellate court agreed and reversed, determining that a general prayer for fees satisfied the section 1942.5(g) requirement of requesting them upon initiation of the action and further deciding that the fifth cause of action triggered MRL fee recovery.

Settlement—Ratner v. Wilson, Case No. G051264 (4th Dist., Div. 3 Dec. 17, 2015) (Unpublished).

    Here, a second judge denied a fee motion under a settlement agreement construed to be valid by a first judge ordering consideration of the fee request.  Second judge refused to grant fees, construing the validity of the settlement agreement in contravention of what was done with the first judge.  Presiding Justice O’Leary, on behalf of a 3-0 panel, said “no go,” can’t revisit the determination by the prior judge so look at the fee request again.

Costs—Grabowiec v. Schopmeyer, Case No. G050978 (4th Dist., Div. 3 Dec. 17, 2015) (Unpublished).

    The decision, again by Presiding Justice O’Leary, reminds us that the routine costs winner is not necessarily a fee winner under a fee-shifting statute—a common argument we see often, but which is usually a loser.  There is a distinction between prevailing for routine costs and prevailing for an award of attorney’s fees.   Affirmance in this one.

Family Law—In re Marriage of Mejia, Case No. B261401 (2d Dist., Div. 7 Dec. 17, 2015) (Unpublished). 

        Last on the list, a fee order under Family Code sections 2030/2032 (needs based) and 271 (sanctions) was affirmed under the abuse of discretion standard based on the failure of appellant to provide an adequate record—no reporter’s transcripts of oral hearings were provided so as to retard review under the circumstances.

Civil Rights, Employment, Family Law, Probate, Settlement: Four Unpublished “Power Ball” Post

 

Meyer v. Brown, Case No. D066226 (4th Dist., Div. 1 Oct. 14, 2015) (Unpublished)—Family Law.

    In this one, after an evidentiary hearing in which the court dismissed a domestic violence restraining order (DVRO), the prevailing party recovered $7,500 out of a requested $15,800 in fees.  The fee-assessed, losing party appealed, but to no avail.  The fee issue can be raised after the DVRO hearing, Faton v. Ahmedo, 236 Cal.App.4th 1160, 1170 (2015), especially given prevailing party checked wanting fees under Judicial Council Form DV-120; the lower court actually denied the DVRO request without prejudice rather than an outright dismissal; and there is no statutory or court rule indicating when the fee request could be brought—using general laches principles, the request was not untimely in prejudicial fashion (even though brought two months later).

Deutsch v. Martin, Case No. B259527 (2d Dist., Div. 7 Oct. 14, 2015) (Unpublished)—Settlement.

    In this second case, the lower court granted about $12,000 in fees and costs under a settlement agreement signed by the parties in a CCP § 664.6 proceeding.  That award had to be reversed because the settlement agreement clearly provided each side would bear fees/costs connected with the settlement agreement; the lower court had no ability to create new terms never agreed to by the parties.

Storm v. Rite Aid Corp., Case No. B254328 (2d Dist., Div. 2 Oct. 14, 2015) (Unpublished)—Civil Rights/Employment.

    The third case involves a plaintiff winning a wrongful termination suit against Rite Aid, then moving for attorney’s fees of about $1.6 million (lodestar times two) under the private attorney general statute, CCP § 1021.5.  The lower court denied the fees, a result affirmed on appeal.  The reason was that plaintiff was only vindicating an individual self-interest, not some greater public interest in the wrongful termination action.

Estate of Maciel, Case No. B258896 (2d Dist., Div. 5 Oct. 14, 2015) (Unpublished)—Probate.

    Fees were awarded to an estate administrator’s attorney to the tune of a little under $8,000.  The objector appealed, claiming no fee entitlement basis.  But that did not hold up on appeal, given that Probate Code section 1064(b) does allow for compensation to an estate administrator’s attorney.

Multiplier, Prevailing Party, Private Attorney General, Settlement, Special Fee Shifting Statute, Substantiation: Three Unpublished “Power Ball” Decisions Synopsized

 

Dept. of Parks and Recreation v. Schoendorf, Case No. H039321 (6th Dist. May 26, 2015) (unpublished).

   In this one, an appellate court denied $300,000 in attorney’s fees against the State under a settlement agreement where “reasonable diligence” governed the fee entitlement.  Given that the prevailing party determination was discretionary under this clause and no one obtained a complete victory, little wonder that Civil Code section 1717 principles required an affirmance of the result in this encroachment case.  After all, “reasonable diligence” does provide a great degree of discretion as to who prevailed, with the lower court decision being entitled to deference on appeal. 

Doe v. Dept. of Education, Case No. C072145 (3d Dist. May 26, 2015) (unpublished).

    This second case was one where plaintiff settled with one defendant, but had some technical victories as to the California Department of Education (CDE).  Ultimately, however, plaintiff did not win as to CDE based on administrative exhaustion arguments.  Although plaintiff sought $840,000 (2.5 multiplier on the lodestar), the trial court denied the request, a result affirmed on appeal.  Reason:  Plaintiff was not “successful” as against CDE, with a pragmatic standard showing plaintiff did not prevail in the case as to this particular defendant.

Robles v. McErlain, Case Nos. A139331/A139532 (1st Dist., Div. 4 May 26, 2015) (unpublished).

    The third cause was an attorney’s fees award in a harassment injunction proceeding, with there being fee entitlement and no necessity to provide good faith as an element.  (Code Civ. Proc., § 527.6; Krug v. Maschmeier, 172 Cal.App.4th 796, 803 (2009).)  The appellate court rejected the idea that detailed billings are required as substantiation under California state law, because an adequate declaration from an attorney as to work will suffice.  However, the reviewing court did reverse a 20% multiplier “bump” given that the case was not complex and not taken on a contingent basis—such that the lodestar factors adequately addressed any fee request and dispensed with the necessity of any positive enhancement.

 

Cases Under Review: SCOTUS Grants Certiorari On Whether A FRCP 68 Offer Of Complete Relief Moots Individual’s Claim And Moots Named Plaintiff’s Class Claim Before Certification

 

Splits Among Circuit Courts On Both Issues—Ninth Circuit Decision Accepted For Review.

     On May 18, 2015, the U.S. Supreme Court granted certiorari in Campbell-Ewald Co. v. Gomez, No. 14-857, a Ninth Circuit decision formerly published at 768 F.3d 871 (9^th Cir. 2014). Two issues involving the impact of FRCP 68 offers of complete relief to plaintiffs are presented for review: do such offers moot an individual plaintiff’s claims and do such offers moot a named plaintiff’s class action claims if made before class certification?

     The majority view on the individual plaintiff issue is that the offer of complete relief does moot the claims, a position taken by the Third, Fourth, Fifth, Sixth, and Seventh Circuits. The minority approach to the contrary is taken by the Ninth and Eleventh Circuits, while the Second Circuit takes an intermediate approach by saying a default judgment should be entered against the defendant offeror.

     Looks like the majority approach on the named class action plaintiff issue swings the other way, with the Third, Fourth, Ninth, Tenth, and Eleventh Circuits holding that the offer of relief does not moot the class action claims under the “relation back” doctrine, while Fourth, Seventh, and Eighth Circuits accept that mootness occurs as long as the offer is made before class certification.

Allocation, Settlement: $40,349.50 Fee Recovery In Enforcing Settlement Agreement Affirmed On Appeal

 

Plaintiffs’ Did Not Represent Himself, But Clients; However, No Allocation Required Based On Intertwined Exception.

     Defendants were not happy when a trial judge not only enforced a settlement agreement under CCP § 664.6 but also awarded attorney’s fees of $40,349.50 based on a settlement fees clause. Their appeal of both rulings was unsuccessful in Federici v. Goff, Case Nos. A141088/141415 (1^st Dist., Div. 2 Apr. 30, 2015) (unpublished).

     Although arguing that some of the work benefitted plaintiffs’ attorney personally so as to fall within the Trope prohibition, the appellate court found the attorney claimed time for representing the prevailing plaintiffs such that the prohibition was not in play, and no allocation was necessary even if the work did benefit counsel under the “inextricably intertwined” exception to apportionment principles. The trial judge reduced the requested fees downward by about 15% to take into account duplication, inefficiencies, etc. such that the amount of the award was reasonable.

Settlement: Trial Judge Erred By Cutting Stipulated Attorney’s Fees Under Proposition 65 Settlement

 

Trial Judge Improperly Cut Stipulated Fees By Almost 50%.

     In Leeman v. Adams Extract & Spice, LLC, Case No. 142321 (1^st Dist., Div. 4 Apr. 28, 2015) (unpublished), the parties reached a settlement agreement in a case arising under Proposition 65, which does allow recovery for attorney’s fees by a successful party under CCP § 1021.5. The case involved allegations that defendant used a carcinogenic chemical in certain food extracts, flavorings, etc. without adequate Proposition 65 warnings. Although incurring fees around $102,000, the parties stipulated plaintiff’s attorneys would receive $72,500 under the settlement. However, the lower court reduced the stipulated fees by about half to $35,839.67.

     Plaintiff did successfully appeal the fee cut. The lower court could not add to or modify the consent judgment pursuant to the settlement unless it set aside the whole settlement—following dictates of CCP § 664.6 and Proposition 65 settlement statutory provisions. (7-Eleven Owners for Fair Franchising cv. Southland Corp., 85 Cal.App.4^th 1135, 1164 (2000); Health & Safety Code, § 25249.7(f)(4).) It could approve the settlement, but could not modify the fee award downward. So, the matter was remanded for an “all or nothing” approval or denial of the entire settlement.

Fee Clause Interpretation, Settlement: Narrow Fee Clause Allowing For Recovery For Breach Of Settlement Agreement Did Not Justify Recovery Where No Finding Of Breach Made

 

Broader Clause Might Have Resulted In Different Result.

     This next case shows that care must be taken in crafting the scope of a fees clause, especially in a settlement agreement. The party successfully enforcing a settlement agreement was denied fees given that the fees clause was not broad enough to allow for the requested recovery.

     Lugris v. Full-Swing Golf, Inc., Case No. D065651 (4^th Dist., Div. 1 Jan. 30, 2015) (unpublished) involved parties to a settlement agreement under which the parties would relinquish stock and execute documents to that effect and the defendants would pay a stipulated $1.6 million sum by a specified date. Importantly, the settlement agreement specified that a “breach of the agreement” would result in an award of attorney’s fees.

     Defendant did not pay on the specified date, with both parties filing “dueling” motions to enforce the settlement agreement under Code of Civil Procedure section 664.6. The court granted the plaintiffs’ motion to enter judgment and ordered the defense to pay the stipulated amount, plus prejudgment interest from the hearing date. Plaintiffs then filed motions for an award of contractual attorney’s fees, with defendants paying the judgment before the hearing on the motion. The lower court then denied the plaintiffs’ fee motions based on the fact there was no finding of breach.

     The appellate court affirmed. Given that entry of judgment under section 664.6 does not require a finding of breach (Hines v. Lukes, 167 Cal.App.4^th 1174, 1185 (2008)), the lower court’s failure to find breach was fatal given the unambiguous narrowness of the fees clause covering only a “breach of the agreement.” The panel also insinuated that a different result might have occurred if the clause had been worded, for example, to provide fees in the event of any legal action, to enforce the provisions of the agreement, or any action in relation to the settlement agreement. Here was the final takeaway given the wording of the fee clause before the court: “Consistent with public policy, the ruling encourages parties to carefully consider the provisions to which they agree, especially knowing their agreements will be enforceable as written. Plaintiffs agreed to settle their claims against Defendants in exchange for a sum of money and the opportunity to recover attorney fees in case of breach. Plaintiffs were free to agree to alternative language, or to further negotiate the attorney fees provision prior to signing. They did not. Plaintiffs are not entitled to attorney fees without a finding of breach.” (Slip Op., pp. 8-9.)

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

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

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

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

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

Section 1717/Settlement: $82,174.25 Fee Award To Successors/Assigns Under Settlement Agreement Sustained Fee Recovery

 

Trial Court Based It On Wrong Document, But Settlement Agreement Confirmed the Result.

     In Jayaweera v. Lansberg, Case No. D065800 (4^th Dist., Div. 1 Nov. 25, 2014) (unpublished), a trial court awarded a certain side prevailing in an easement dispute $82,174.25 in attorney’s fees under a Declaration of Restrictions (easement), a ruling challenged by the opponents when they argued there was no basis for fee entitlement based on this document. Actually, the appellate court did not disagree, but affirmed the award under the rule that a correct result—even if based on erroneous reasoning—still confirms a result below. Here, there was a separate settlement agreement binding the losing parties and successors/assigns (the winning parties), such that the fee award was justified under Civil Code section 1717.